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Entrepreneurship Development and Training

Author(s): Dr. Marus Eton
Entrepreneurship Development and Training
Dr. Marus Eton
Department of Business, Faculty of Arts and Social Science, Kabale University, Kabale, Uganda
Publication Month and Year: November 2019
Pages: 130
E-BOOK ISBN:978-81-943354-1-2
Academic Publications
C-11, 169, Sector-3, Rohini, Delhi
Website: www.publishbookonline.com
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Phone: +91-9999744933
Entrepreneurship Development and Training
Dr. Marus Eton (PhD)
Dr. Eton Marus (PhD) comes with vast working experience in academia. He is a dynamic, self-motivated professional with multi-disciplinary academic background with professional proficiency in the areas of Finance and Accounts, Business, Monitoring and Evaluation. He is a Lecturer at Kabale University in the department of Business. He has Doctorate in Business Administration with specialty in (Finance). He has additional qualifications in areas of Financial Management, Monitoring and Evaluation, Accounting, and marketing. He is an accomplished scholar and researcher. He has made a number of publications in peer reviewed journals. He has presented papers in international Conferences and renowned consultant in business and research. He has wide experience in lecturing at higher institution of learning. The Author lives in Uganda.
eton.marus@gmail.com. emarus@kab.ac.ug 256772880149/256701304416
Entrepreneurship Development and Training
Course Description
The Entrepreneurship course is a dynamic course designed to inspire and engage learners in the fundamental aspects of an entrepreneurial mindset and the unlimited opportunities it can provide. This course will empower learners through entrepreneurial thinking and immerse them in entrepreneurial experiences that will enable them to be creative and innovative. Furthermore, the course will expose learners on the application of entrepreneurship skills. Thus, creating and managing viable enterprises.
Course objective
To equip students with innovative and creative skills in the business environment.
Learning outcomes
By the end of this course, a student should be able to
i)Develop critical thinking skills that will enable them to identify and evaluate entrepreneurial opportunities, manage risks and learn from the results.
ii)Analyze the process that enables entrepreneurs with limited resources to transform a simple idea into a sustainable success.
iii)Establish goals, identify resources and determine the steps required to start and manage a business.
iv)Demonstrate and interact with local entrepreneurs and business owners within their own communities.
v)Develop a business plan for starting up a business
Detailed Course outline
1.Introduction 10hours
•Introduction to entrepreneurship
•The concept of entrepreneurship
•The entrepreneur and entrepreneurial characteristics
•Entrepreneurial success
2.Environmental analysis 15hours
•Introduction to environmental analysis
•Internal environmental analysis
•External environmental analysis
•Challenges in industrial analysis
3.Creativity and innovation 10hours
•Purposeful innovation
•Sources of innovative opportunity
•The bright idea
•Principles of innovation
4.Starting a business 10hours
•Feasibility study
•Business plan
•Implementation follow up
•Control of the business project
S. No.ChaptersPage No.
1.Entrepreneurship Development and Training01-25
2.Types/Classification of Entrepreneurs26-39
3.The Entrepreneurial Process40-51
4.Small Business in Uganda52-60
5.Creativity and Innovation61-74
6.Environmental Analysis75-85
7.Feasibility Study86-95
8.Introduction to A Business Plan96-115
9.Entrepreneurship Development116-121
Chapter - 1
Entrepreneurship Development and Training
An entrepreneur refers to the person or persons who undertake the task and risk of organizing other factors of production (land labor and capital). He is the coordinator or mobilizer, a risk taker, innovator and decision maker.
The entrepreneur therefore organizes natural resources and capital goods for production to take place. This is done in anticipation of demand and supply.
Entrepreneurship is a process of creating something different with value by devoting the necessary time and effort or entrepreneurship is the process of creating incremental wealth.
Characteristics of Entrepreneurs
i)They are risk bearers that are; they risk their capital against uncertainties in business.
ii)They are enterprising that is; have the courage and willingness to do new things.
iii)They are creative and innovative that is; they bring about new ideas and things.
iv)They are decision makers i.e. they are good and quick at deciding.
v)They are mobilizes that is are able to bring together the resources (land, labor and capital) for production.
vi)Good planning i.e. should be good at determining in advance what, when, where, and how to produce something.
vii)Patient, this is the ability to persevere and be diligent i.e. to endure all kinds of business problem.
viii)Restless. they don’t rest unless their dreams come true
ix)Independence that is they are free from control, support or influence of others.
x)Have the need for achievement
xi)They are ambitious.
xii)They always want to win.
Problems Faced by Entrepreneurs
•Taxation by the government.
•Government intervention by nationalizing and fixing prices.
•There is political pressure.
•Competition for the market.
•Lack of infrastructure for easy distribution of goods and services.
•Fluctuating demand and supply situations which in turn affect planning of what, when, where and how to produce.
•Insufficient profits.
•High inflationary tendencies.
•Insufficient financial services and loan funds are low.
Importance of Entrepreneurship
i)It leads to employment opportunities both for the entrepreneur and those who help him
ii)It contributes a lot to government revenue in form of taxes.
iii)Entrepreneurship utilizes those resources that would otherwise be redundant.
iv)It helps to maintain constant flow of goods and services.
v)Provision of a variety of commodities to consumers raises their standards of living
vi)The excess profits generated by entrepreneurs is used to finance social services e.g. sport
vii)It helps in the development of infrastructure e.g. Bridges, roads.
viii)It may lead to the inflow of skills and the development oflocal skills
ix)It also helps to increases the export potential of a country.
x)It increases domestic investments through competition and inflow of foreign capital
The Process of Entrepreneurship
There are four Stages in the Entrepreneurship Process. They Include
i)Some Changes in The Real World
A change in the real world may bring a lead to produce something new, this change is spotted through conscious acting of scanning the environment for example change in weather conditions from humid to dry weather may lead to the production of drought resistant crops in the areas where Agriculture is rain fed.
ii)Idea Generation
At this stage a new idea over something comes from what is happening in the real world, from the above for example the idea of producing drought resistant crops may have come from understanding of a real change in the weather conditions.
iii)Opportunity Identification
This involves conscious knowledge of the gap within the environment that really needs to be filled. It starts with an assessment of new ideas with possible opportunities associated to it.
iv)Viability and Feasibility
Opportunity identification also goes hand in hand with viability and feasibility tests. At this stage an identified opportunity is to be tested on the grounds whether it can be profitably exploited using the available resources during a particular time period
Actual Operation of the Identified Opportunity
Entrepreneurship Development
Entrepreneur refers to someone who undertakes to organize, control, manage and take risks/ profits of the organization.
Entrepreneurship refers to the process of creating and building a vision of creating and building a vision from practically nothing, fundamentally it is a human art.
1.Psychological Profile
Is the way an entrepreneur thinks, perceives or visualizes himself and his environment and how this influences his behaviors? Behavior here entails feelings, attitudes and opinions.
Many writers have tried to explain entrepreneurship in different but mutually connected way. So different theories of entrepreneurship exist and there have been different definitions of entrepreneurship but most of them add something to other definitions.
Hisrich and Peters (1995) defined entrepreneurship as a process of creating something different with value by devoting necessary time and effort, assuming the accompanying financial, psychological and social risk, and receiving the resulting rewards of monetary and personal satisfaction.
Another writer RonStandt (1984, 28) improved the above definition by defining the entrepreneurship as a process of creating incremental wealth. He said that the wealth is created by an individual (entrepreneur) who assumes the major risk in terms of equity, time and career commitment or provides value for some products or service may not be new or infused b the entrepreneur by receiving and allocating the necessary skills and resources
A consistent universal theory of entrepreneurship does not exist but in general the theory consists of several different approaches including sociological, psychological, anthropological and economical approaches.
Timmons (1999) defines entrepreneurship as a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach and leadership balanced
Gupter and Sprihivan(1995) defines entrepreneurship to involve combining factors of production to initiate changes and to that it is a discontinuous phenomenon.
Donald and Richard (1989) defines entrepreneur as a process of innovation and new venture creation through four major dimension-individuals, organization, environment and process and aided by collaborativenetworks in the government, education and entrepreneurship.
The essence of entrepreneurship is the urge to match the continuous changes in the environment with regard to the way an organization operates and to the product innovation and improvement.Thus, the central entrepreneurship role is constant desire to create something new such as; new insights into the market, new corporate value, new manufacturing processes, new product and service or new ways of managing all entrepreneurial activity revolves around the birth and operation of new ideas.
The primary concern of entrepreneurship is desire to constantly adjust with in the volatile business environment. As the economy undergoes changes, newer and better methods of dealing with such changes are sought and researched: a new organization, new insight into the market, new corporate values, new manufacturing processes, new product or services, new ways of managing.
Entrepreneurship process therefore through information synthesis, observes such changes especially those signaling opportunities and makes considerable judgment of the likely gains out of it. The entrepreneur thus becomes innovative only if he discovers the ways which improves the efficiency in the use of resources thereby improving production, productivity and quality of a product or service required by the community.
Entrepreneurship is not a natural gift or talent peculiar only to some few individuals. Under normal circumstances, it is believed that everybody can upgrade his / her entrepreneurial skills through spontaneous and conscious activity of training, experience, education and social structures such as family; peers and religion. These factors interact with desire to create something new and different from the common and general understanding of a particular phenomenon.
Psychological Perspective of Entrepreneurship
In this study, several psychological theories have been analyzed above; these theories bring out personality characteristics that are closely related to those of entrepreneurs. These include: -
1.The Needs and Achievement Theory: Development by McClelland emphasizes three for Achievement, need for utilizations and Need for power. It pays attention to personal traits, motive and incentives of on individual and concludes that entrepreneurs have a strong head for achievement (McClelland writer 1971).
2.From Douglas McGregor’s theory x and theory y, we can learn that people who believe in theory y have strong self-drive and can work comfortably alone. This is common characteristics of entrepreneurs.
3.From within the hierarchy of needs of has lows theory that within them there is that level where the individual seeks esteem and self-actualization. This can be likened to the entrepreneurs need for recognition and applause.
4.The Hygiene theory developed by Hertzberg, indicate that the motivating factors of an individual involve achievement, recognition and advancement.
5.The Expectancy theory on the other hand, talks of behavior as being determined by a combination of forces in the individual and the environment.
6.A similar focus is found in locus of control theories that conclude that an entrepreneur will probably have strong internal locus of control (Low and Mac Millan 1988).
This means that an entrepreneur believes in his or her capabilities to commerce and complete theories and events through his or her own actors.
However, prior research has suggested that individual involvement in entrepreneurial activity cannot be predicted by a simple set of characteristics (Sandbarg and Hofer 1987), But the above theories give us a clean indication that entrepreneurship characteristics are a subset of the personality characteristics of an individual as brought out clearlyby the psychologists. In view of the above, the study will summaries the characteristics into those most commonly identified with entrepreneurship. These will include among others.
•Achievement motivation.
•Affiliation needs.
•Loans of control.
•Risk taking propensity.
•Tolerance for ambiguity.
Researchers have said that there is no characteristic predisposition or set of traits of the individual entrepreneur level of analysis that consistently “predicts” entrepreneurial activities the study skill aims at establishing a close link between entrepreneurship and human psychology. To achieve this, we shall analyze each of the above traits in detail.
Achievement Motivation
The root of the achievement motive lines with the Weberian concept of the protestant work ethic.
McClelland (1961) proposed that the need for achievement was a psychological motive derived from particular types of familiar socialization intervening between ideological values the entrepreneurial behaviors.
Achievement motivation can be defined as behaviors towards competition with a standard of excellence (McClelland 1953). People who have high levels of achievement motivation tend to set challenging goals and try to achieve these goals. These people value feedback and increase it to assess their accomplishments Achievement motivation is accepted as important characteristics of the individual and influences work behavior to a great extent
Certain characteristics of individuals with high achievement need may lead to different levels of entrepreneurship styles. For organization McClelland and Koestler (1992) suggested that people with high levels of achievement motivation will be future anointed and will take tasks seriously if they believe that current tasks will influence future goals.
Besides, achievement motivation refers to a desire to outperform other people, people with achievement motivation find satisfaction in companying themselves to others and is motivated by this comparison.
Affiliation Need
Affiliation need refers to a desire to be close to other people in order to feel re assured that the self is acceptable (McClelland, 1953). In his research or the theory of psychological motivators McClelland found out that entrepreneurs are also driven by the need to stay in harmony with their environment, being of service, a problem swore and to make beneficial contribution to the welfare of their immediate society.
Locus of Control
Locus of control refers to the perceived control over the events in one’s life (Rotter,(1996) people with internal locus of control what happens in their lives on the other hand, people with external locus of control tend to believe that most of the events in their lives result from being lucky, being at the right place at the right time, and the behaviors of powerful individuals people’s beliefs in personal control over their lives influence their perception of important events their attitude towards life, and their work behaviors.
Locus of control may be related to pro – activeness. When individuals believe that they can make a difference in their lives by performing certain actions, they may be more willing to think about the future and act proactively; research indicates that people with higher degrees of internal locus of control tend to monitor the environment to obtain information.
Internal locus of control may also be related to risk taking orientation research shows that internals tend to estimate probability of failure as lower and decide in favor of risky options.
There is also reason to expect a positive relationship between the locus of control, innovativeness and competitive aggressiveness, to the extent that individuals feel that being compressively aggressive or being innovative are ways of exerting control over the environment we can expect a positive relationship between these variables.
Risk – Taking Propensity
This is defined as the “perceived probability of receiving rewards associated with the success of a situation that is required by the individual before he will subject himself to the consequences associated with failure, the alternative situation providing less reward as well as less several consequences that the proposed situation “risk taking is defined as a trait that distinguishes entrepreneurs from non-entrepreneurs.
Risk taking propensity of the entrepreneur is expected to be related to the risk-taking level of the entrepreneurial firm. When entrepreneurs have the ability to influence the actions of the organization with their personal decisions, their personal characteristics may be reflected in the actions of the organized as a result the organizing be more risk taking the propensity may positively influence innovativeness especially product innovativeness, product innovativeness requires a certain degree of tolerance for taking risks, because innovativeness benefit it’s from a willingness to take risks and tolerate failures the risk – taking propensity of the entrepreneurs will positively influence innovative attempts of employees and as a result the organization may adopt an innovative orientation to face the competition.
Tolerance for Ambiguity
This refers to a tendency to perceive ambiguous situations in a more neutral way people who have low levels of tolerance for ambiguity tend to find unstructured and uncertain situations uncomfortable and want to avoid these situations. A certain level of tolerance for ambiguity may influence organization success positively because organization events are uncertain and UN structured most of the time and organization success requires the willingness and ability to cope with uncertainty. Tolerance for ambiguity may be related to certain entrepreneurial styles. Tolerance for ambiguity found to be related to personal creativity (Terano 1990) and the ability to produce more ideas during brain storming. These findings suggested that creativity and innovative less requires a certain level of tolerance for ambiguity. The ability to tolerate ambiguous situations may also be positively related to the risk – taking style of the organization.
Tolerance for ambiguity may also be positively related to pro – activeness.
This requires a desire to think about the future and take actions to answer future situations and threats proactive organization need to think beyond.
Conventional ways of operating and question the strong quos as a result pro activeness requires the capability to handle the unknown, people who are able to tolerate ambiguity may lead their organization to become more proactive.
2.Sociological Aspect of Entrepreneurship
Sociological theory tries to explain entrepreneurship as a process whereby the individual’s sociological background is one of the decisive push factors that can influence such an individual to become innovative and creative in a particular field of activity and thus become an entrepreneur. Entrepreneurship is seen as a response to inferior social conditions, people become creative (entrepreneurial) in the areas where they are socially deprived or seen to have the possibility of being disadvantaged. It is said that if people are disadvantaged they will become entrepreneurs and spear head the drive for economic change.
The entrepreneurial skills are highly affected by sociological environment which distinguishes different opportunities that one may be able to exploit. That is to say, entrepreneurship can be affected by a number of factors which surround a particular society they include:
i)Child Family Environment
The family environment of the entrepreneur includes birth orders, parents’ occupation and social status, and relationship. It has been found that being a first born or an only child is postulated to result in the child receiving special attention and thereby more self-confidence. In terms of occupation of the entrepreneur’s parents, there is strong evidence that entrepreneurs tend to be self-employed, or entrepreneurial fathers. Having a father who is self-employed provides a strong inspiration for the entrepreneur. The overall parental relationship regardless of whether they are entrepreneurs is perhaps the most important aspect of the child hood family environment in establishing the desirability of entrepreneurial activity for the individual. Parents of entrepreneurs need to be supportive and encourage independence, achievement and responsibility.
The family network influences the ability to mobilize resources necessary for the business or enterprise. The capital can be mobilized through inheritance patterns, family loans and cheap loans and cheap labor in the family. Most successful businessmen belong to groups with internal relationship and trust.
ii)Family Background
The family background has great influence on the growth and development of entrepreneurship. The nature of activities that a particular family undertakes determines the type of entrepreneurship that will be adopted by the growing entrepreneurs. For example, if the family deals with hand crafts there is a greater possibility of developing entrepreneurs in such a field.
In the sociological aspect of entrepreneurship, it has been found out that religion plays a major role towards entrepreneurship. For example, some religious communities in India i.e. Parseers, Marwarsand Sindlees are seen to have an affinity for industrial activities. Religion exercises a strong influence on attitudes towards material gains relatively to efforts.
A complex and varying combinations of financial, institutional, cultural and personal factors determines the nature and the degree of entrepreneurial activity at any time. The personal background of the entrepreneur are determined mainly by the environment in which they are born and brought up and work.
A multiple of environmental factors determine the entrepreneurial spirit among people. The entrepreneur in turn creates an impact on the environment. Thus the interaction between the entrepreneur and his environment is an ongoing process. At any one given point of time, the entrepreneur delivers meaning from the environment prevailing at that time and tries to adopt and or change the environment to suit their needs.
The environment especially the external is dynamic and it keeps changing and affects different organizations to a varying extent. For example, government policies, political excessive red tape, ideological and social conflicts, rising costs of input etc. Therefore, entrepreneurship is environmentally determined and the most important tool for entrepreneurial growth is the presence of a favorable business environment.
There is no link between race and entrepreneurship. Entrepreneurs have sprung from all region of the world without any bias to any particular region (race). Evidence however exist which shows entrepreneurship in Africa is a reality. For instance, African entrepreneurs raise start – up and operating capital from community resources such as rotating credit systems involving social groups.
vi)Time and Age
The time and age of entry into entrepreneurship are important factors to most entrepreneurs. In terms of chorological age, most entrepreneurs initiate their entrepreneurial careers between the ages of 22 and 55 (Hisrich and Peters 1995). They also said although a career can be initiated before or after these years, it is not as likely because an entrepreneur requires experience, financial support, or high energy level in order to successfully launch and manage a new venture. According to the study carried out in India, it was found that two thirds of the entrepreneurs entered into entrepreneurship before the age of 25 years. People from mercantile communities entered into entrepreneurship comparatively at younger age due to their early orientation and guidance by their parents. The important thing to note here is that a person can join entrepreneurship at any age provided he/she has ability and interest of becoming an entrepreneur.
Hofstadter (1991) defines culture as the collective programming of the mind which distinguishes the members of the group or category of people from another. The mental programming referred to above consists of shared values, beliefs and norms. These mental contracts influence how people socialize their particular culture, and the way they perceive events. They also help to determine what behaviors are considered appropriate or inappropriate in various social situations.
Hofstede Identified from Value-Oriented Dimensions of Culture that may be used to Describe Cultural Groups. They Include
•Power Distance
This is the general measure of the degree of interpersonal influence that those who hold power in a social structure can exert over those who lack power. According to Hofstede, it is the difference between the extents to which
Superiors in a social hierarchy can determine the behaviors of a subordinate compared to the extent that the subordinate can determine the behavior of the superior.
In high power distance societies, inequality between social groups is expected as part of “natural’ order. Consequently, there tends to be large social and economic gaps between those who have power and those who do not. In addition, movement between high and low power groups is restricted creating a tendency towards distinct social classes with little exchange between the groups.
In contrast low power distances societies attempt to minimize inequality between classes, emphasizing the ideal of equal rights for all members of the society even if it is not perfectly achieved. Social mobility is relatively easy in low power distance societies and a large middle class is usually present to bridge the gap between more or less privileged groups.
In high power distance cultures because of the social inequality characterizing high power distance regions, access to educational systems and economic resources may be restricted to the privileged class.Moreover, members of the lower classes may not be accepted into entrepreneurial roles, or lf they assure such roles, their activities may be devalued or considered illegitimate.
•Uncertainty Avoidance
The level of anxiety experienced by members of cultured due to ambiguous events may vary as a function of the society’s values and beliefs. Uncertainty evidence is a measure that indicates a group’s level of anxiety regarding future event. It evaluates the degree of tolerance of a culture of the ambiguity that is internet in a continuously unfolding future.
Societies attempt to manage uncertainty through rules, technologies, laws and initials in order to protect members from anxiety. These devices standardize the behaviors of society members and make the outcome of social processes more predictable.
This is the measure that indicates the degree to which individual identity and self-concept are linked to collective groups of the society. In individualistic societies, personal values and goals are prime determinants of behaviors and self-identity.
Of all Hofstede’s value dimensions, the one most directly associated with Weston ideals of entrepreneurship is individualism. In the Weston model, the activities of the entrepreneur are quite essentially individualistic.
Hofstedes final cultural direction is masculinity. Despite its name, this construct does not measure specific differences between male and female, rather it refers to learned styles of behavior that have been (stereotypically) applied tomales and females.
The masculinity measure evaluates the general tendency to act either assertively (Masculine) or in a nurturing manner (feminine) In high masculinity societies, individuals tend to set high performancestandards and act forcefully to achieve these standards. In societies with a low masculinity, nurturance issues are prominent.
Its relation to entrepreneurship would seem to be through the assertiveness and high need for achievement characteristics of “masculine” culture. In masculine societies and material success achieved through successful entrepreneurial ventures is valued and entrepreneurs who attain such success are recognized and esteemed. Conversely in relatively feminine cultures, achievements motivation, at least in the material sense, is relatively weak and success is defined in terms of pleasant human relationships.
Research has it that some entrepreneurs are / were migrants having come from different places with in the state from outside limited knowledge of the language or culture of the majority or discrimination against the immigrants led to difficulties in securing jobs in existing firms. A viable alternative in this inhospitable work environment is striking out ofone’s own. Therefore the explanation forimmigrants high rate of business creation is a combination of their social costiveness and difficultiesincluding exploitation they encounter in the broader labor market one such explanation associated with the early work of Ivan light among others, argued that the more hardship and frustration in migration experienced in the main stream economy, the more likely they were to seekemploymentand develop stronger economic and social bonds with in their ownethnic community. These in turn complete in the broader market by providing them with information networks services of credit, a loyal consumerbecause for their goods, and steady supplyof co- ethnic laborers.
It should be noted however, that among immigrants, the traits of risk taking and ambition are like
ix)Occupational background
It is widely held, but untested consensus that past experience is a better predictor of decision, performance, and behavior than education (Bird 1993). Thus, the most powerful way of learning is through ones occupation that is direct experience of the subject matter. It is therefore, assured that one might learn that entrepreneurship is desirable feasible and profitable from the concrete experience of working in one own or other persons firms.
Occupational background or previous work experiences are described etc formative and may encourage entrepreneurial behavior. The skills gained through formative experience may be managerial, financial attitudinal or a combination of these, and may build business competence, high lighting opportunities for the individual
Small businesses have been suggested as incubators for future entrepreneur, although they may be viewed as formative, it can also be viewed as a reactive experience due to the fact that the organization environment may be unstable and job prospects are limited as are rewards.
Gender is one of the sociological angles from which the theory of entrepreneurship can be viewed Depending on the social, political, cultural economic and historical as well as religious settings of the gender the theory of the entrepreneur changes. In India the caste structure was such that social mobility was estimated and this people born in a specific caste confirmed themselves to particular look at women in this case study it was found that women were in the lower caste particularly demised access to education acquisition of skills other than those that would confide them to motherhood and house care and as such the majority of them contented themselves with the role of child upbringing and housekeeping. Not with standing this they were economically marginalized and psychologically biased towards initiation of business or in visionary ventures. As a result few of them ever ventured into entrepreneurial activates. They therefore did not from their perspective have the impetus to become innovators. Some religions societies like the Parsees, Marwari and Sindlees on the other hand in India had an affinity for industrial activity and as result some of the women from such societies tended to have an affinity for industrial occupation and entrepreneurship in the same field.
Dominance of certain ethnical groups / sexes in entrepreneurship is global phenomenon. The protestant ethics in the west, the samurais in Japan, the trending classes in U.S.A and the family business concerns in France from those we can clearly observe putting into consideration, family background, the type of industry that could be started, the type of ownership and the average annual, monthly income of the family all played down heavily on the ideas of what an entrepreneur was from a gender perspective.
xi)The Handicapped
The handicapped in India also formed asset of their own in India.(these of course transcended in all cases, education background, religious affiliation and physical capacity. the handicapped formed quite a number in the Indian community mainly due to the then high prevalence of polio and poor working conditions. From their perspective they were already psychologically and physically impaired as a result very few of them even dreamt let alone really achieved the status of entrepreneur. They tended to regard themselves as a less privileged caste of their own and did not very much venture into entrepreneurship or become entrepreneurs not withstanding that society as a whole already viewedthemnegatively all in all m, the perspective of the entrepreneur was such that considering the social economic and political settings of their surroundings, the handicapped did not (generally) a result few of them ventured into entrepreneurships it therefore acted (handicraft as a sort of barrier to expression but not complete inability.
The early entrepreneurship theorists advocated that entrepreneurship cannot be taught or learned in schools, they believed that entrepreneurship has been recognized that one must be born with. Currently entrepreneurship has been recognized as a discipline that can be used to help an entrepreneur to acquire important traits which he might not possess.
Formal education; helps an entrepreneur to develop entrepreneurial skills like resourcefulness. However, the lack of higher education is not an obstacle or limiting factor. The study conducted in India reveals that majority of entrepreneurs lacked higher education. Most of these were young persons with higher education seemed to prefer white color jobs in the government. However engineers, technicians and other professionals are however coming forward as entrepreneurs.
The level of education that the society possesses may contribute substantially to the kind of entrepreneur that will grow in such a society. Education helps the entrepreneur to know what is going on in other parts of the world and can enable him / her to improve in all aspects of his or her activities. Therefore, education is important factor that can influence development of entrepreneurial skills or creativity.
xiii)Schools and Institutions
Schools and institutions form an integral and fundamental grouping in society. As seen above the level of education is one of the key factors that influence entrepreneurial participation in a society. Much as the individuals in these schools/institutions in India were all in away affected by their individual historical background which includes size of family, type of family and economic status of family. According to Hadimahis study, Zamidar family helped to gain access to political power and exhibited higher levels of entrepreneurship.
We also observe that family status of the individual greatly influenced social and physical mobility of a person. These institutions however were also affected by religion, which exercises a strong influence on the attitude towards material gain relatively to efforts. Max Weber propounded the theory that the ‘protestant ethic’ among Christians fastened the right attitude for entrepreneurial skills like resourcefulness however the lack higher education is not a limiting factor. Since education and technical knowhow is primarily acquired in schools/ institutions and we know that education is the best means of developing man’s resourcefulness which encompasses different decisions of entrepreneurship
It is important on this wrote to reveal the studies of AsdlokKuhar who found that many of the very successful entrepreneurs were graduates and post graduates particularly in engineering and other technical discipline and also that Kamma and Brahim entrepreneur were relatively more educated than others. This may be expected that higher levels of education may enable the entrepreneurs to exercise their entrepreneurial talent more efficiency and effectively. Therefore, it can be said that people from schools (institutions are helped to acquire / discover themselves potential as entrepreneur. This is focus, the elite perceived themselves as highly potential entrepreneurs had high option of becoming as identifying them as one, hence explaining why the greater majority of entrepreneurs are institutional outputs.
3.Economic Theory of Entrepreneurship
This one looks at an entrepreneur as an innovator who is capable of identifying opportunities, exploiting them and turning into Marketable ideas. He adds value in the form of time, money, skills and accepts the rises of competitive markets with regard to implementation of ideas or exploitations of opportunities and eventually the community benefits from his effort.
Schumpeter (1934) defines entrepreneurship “essentially a creative activity consisting of doing such things as are generally hot done in the ordinary course of business.
Timmons (1999) defines entrepreneurship “as a way of thinking, reasoning and acting that is opportunity obsessed holistic in approach and leadership to exist, an activity ought to produce something different, something specific, that changes and upgrades field from resources.
According to Hertzberg (1998) the entrepreneur’s business has two main purposes. The first is to create the next satisfied customer “string to fulfill some need, either real or perceived. The second purpose is to “out with navels by (beating) the opportunities not yet taken and therefore to make the largest profit possible. He creates satisfied customers by developing needs.
The entrepreneur is also important in that he improves an existing good or service through innovations or develops a new one. This is an economic action that can also create a need for a commodity by investing or marketing it in a new way. An entrepreneur must also be constantly aware of what people are looking for and also be aware of potential uses of client goods and services when an entrepreneur is successful, he will make profit.
Schumpeter’s Theory of the Entrepreneur
He said the development of entrepreneurship was a Factor of Production (F.O.P). He sees the entrepreneur as having a decision-making role and his /her main function is to be viewed in a wide perspective and induces the introduction of a new methods of production; opening of new market and creation of new types of individual organization.
Schumpeter looks at entrepreneurship as the avenue through which technological change comes. The resultant technological change comes. The resultant technological change in essence means a form of economic development. Scamper argues that as the economy develops progress will eventually come to be “mechanized”.
Another salient aspect of the Schumpeterian view is that it emphasizes the idea of the entrepreneur as a sow ice of disequilibrium in the economy Schumpeter argued that equilibrium and optimization, is the horn of a healthy economy and the central reality for economic theory and economic practice.
Also, Schumpeter initially sees innovation and hence economic growth and development as being the province of bold individual entrepreneurs.
The Entrepreneur and Technological Change
Basic innovations are more or less exogenous to the economic system in that their supply is perhaps influenced by market demand in some way, but their genesis lies outside the existing market structure accordingly Schumpeter argues that the entrepreneur seizes upon these basic inventions and transforms them into economic innovations. In this aspect we may see the entrepreneur as playing a key role in technological change in industry.
Micro economic theory points out that resource owners and producers invest their talents and other resources in production with an aim of reaping returns, similarly Schumpeter late that the successful innovator reaps level short term profit which are soon bid away by imitators.
Schumpeter’s theory however portrays the bold entrepreneur as one who does not let off because of the said imitators come into play there is always new knowledge with in the entrepreneurs’ sphere. Indeed, the job of the entrepreneur is precisely to introduce new knowledge.
The Obsolescence of the Entrepreneur
The obsolescence of the entrepreneur becomes clear when we look at telemeters’ elaboration on the nature of large corporations and its role in his theory Schumpeter believed that economic history influences economic theory. Perhaps because of the changes he saw in contemporary economics (rapid industry and increased expenditure on research and development in large cops) Schumpeter argued that the entrepreneur role was gradually being assimilated by the corp. He saw the inventive activities as singly under the control of large firms and this reinforces their competitive position. There is a historical trend in Schumpeter is idea that the entrepreneur will eventually become “less important” or obsolete” and large firms would occupy a more prime position.
This social function (entrepreneurship) is already losing importance and is bound to lose it at an increasing rate in the future even if the economic process itself of which entrepreneurship was the prime mover went on unabated.
The Entrepreneur and Disequilibrium
Schumpeter argues that in a world of limited knowledge, entrepreneurship is necessarily an unpredictable and extra rational activity. This argument leans towards a liberal social order continently, the Schumpeterian view asserts that the capitalist process aided by entrepreneurship) progressively raises the standards of life of the razzes. Economics aim at bringing those things that once were for the elite to the reaches of common individuals. And this Schumpeter says can only be done through the success of risk takers (supported by entrepreneurs) similarly, the rate of general economic progress will depend on the ability of individuals to commend resources and direct them in unconventional and surprising directions.
Yet, it’s the same process of innovations, Schumpeter argues, that thrice dynamic disequilibrium, basically inventions are more or less exogenous to the economic system. Entrepreneur base upon opportunities and strive to be pioneers in production of new products. Those who are successful reap large short-term profit. This as we noted earlier encourages competitors into the market in the form of imitators. Similar, great innovations lead to the elimination of jobs and firms. Schumpeter called this “creative Destruction” the effects of entrepreneurship not only create progress, jobs, firms, and improved standards of living, but also put some jobs, firms and products out of business.
Schumpeter therefore argues that innovation leads to disequilibrium and alternation of the existing market structure but as time goes on, the situation eventually settles down to wait for the next wave of innovation. The result is a punctuated pattern of economic development that is perceived as a series of business cycles.
Israel Kirzners View of Entrepreneurship
Israel Kirzners procedure is based on an analogy, or a parallel between what he calls the entrepreneurial element in individual decision making and entrepreneurship in the market interaction. He isolates the entrepreneurial element by contrast in routine optimizing behavior with what he claims we can know about time individual action by means of a close inspection.
To Kirzner, close inspection reveals that individuals spontaneously discover means of satisfying their wants. For example, an individual light follow a sub conscious vision that is either vision or impression) and as a result experience an unexpected gain he calls such spontaneous discovery – the entrepreneurial element.
Kirzner further identifies what he regards as a crucial kind of action in a market economy that is arbitrage (this is the purchase and sale of same or equivalent securities in order to profit from piece discrepancies). Kirzner associates entrepreneurship in the market economy primarily with this action. He further argues that as the entrepreneurial element in individual decision making leads to a more efficient personal allocation of resources or co-ordination of the individual’s plans, so also does entrepreneurship in the market economy that arbitrage leads to economic coordination or the more efficient allocation of resources in the economy.
The Discussion Will Focus on The Following
1)Entrepreneurial Element in Individual Decision Making
The attracting point for understanding Kirzners definition of entrepreneurship is the isolated actor. This isolated learning is linked to entrepreneurial characteristics which (sporadically) a rise from people in their various isolated environments.
a)Spontaneous Learning
Kirzners idea of entrepreneurship is based on what he calls bounteous learning. This he said is not planned learning. Thus, it is sub conscious subconscious learning is synonymous with the transformation of a previously recognized entrepreneurial vision into recognized contributor to satisfaction, when Kirznerls says that an individual belief. Lay constitute an entrepreneurial vision he was hot reforming to a conscious belief. He would in essence bet that his belief was correct. His action would therefore be indelibility choice.
Kirzner calls the state of mind that enables spontaneous learning to occur as alertness. According to kirznersjust as leaving is spontaneous, so also is alertness. This state of mind cannot be produced as improved upon; it’s part of human nature. Individuals may differ in their alertness.
c)Transformation of Spontaneous Learning into Conscious Knowledge
After an entrepreneur has recognized his vision (or hunch), it’s longer subconscious. According to Kirzner it becomes a factor of production. The individual how takes it into account in his decision making. This when individual recognizes that following previously subconscious vision is a means of increasing his satisfaction, he simultaneously discovers that he possesses a factor of production This entrepreneurship is a discovering process although a subconscious one.
d)Motivation for Subconscious Learning
In spite of the fact that spontaneous learning is a subconscious process, Kirzner says that it’s encouraged by the possibility of gain. He says, lf we know anything atall about theprocess of spontaneousdiscovery of information, it’s thatthis processis some low altogether more rapid when the relevant informationwill be of benefit to the potential discoverer.
2)The pure entrepreneur and the entrepreneur economy
According to Kirzner a pure entrepreneur is decisions maker whose entire role arises out of his alertness to hitter to unnoticed opportunities. This activity of these pure entrepreneurs can then explain how prices and input and output quantities and qualities charges.
3)Alertness and Arbitrage
For Kirzner, the first characteristics of an entrepreneur is alertness the crucial question (in the task of the theory of the market) concerns the nature of the forces that bring about changes in the buying, selling, producing and consuming decisions that make up the market. This force Kirzner says consists of learning from mistakes for example the help to explain how yesterday market experience can accounts for change on plans that might generate alterations in prices in outputs or in the uses of inputs hence the fact that men learn their experience in the market.
The learning which Kirzner has in mind is subconscious, and the changes are hot consciously chosen Kirzner is hot referring here to market participants who, each motivated by his personally protected gain from trade, He is referring to a subconscious process. The expectation that traders have of other’s plans change subconsciously. Traders are subconsciously alert to changes.
In short, the pure entrepreneur first subconsciously discovers what he regards as an opportunity to earn money by buying and selling (or by buying F.O producing a good and selling it) then he fiancés his venture by burning money from a capitalist, the entrepreneur uses the funds for his entrepreneurial venture, and then he pays back the capitalist, including interest and keeps the pure entrepreneur profit” A good descriptive label for the behavior performed by the pure entrepreneur is arbitrage. Thus the defining characteristics of entrepreneurship in the market economy are arbitrage.
a)Differences among Individuals
Individuals in market differ in their alertness. For example, if two individuals buy and sell of the basis of sub conscious visions, the first may be more correct, in the eyes of the superior insight, than the second. The money earned by the first win corresponding be grater similarly if two individuals buy and sell on the basis of some subconscious vision one may come to subconsciously realize that the vision, in gain while the other remainsinward of his vision contribution to his earnings. Leaving has therefore accrued in the first instance only.
b)Learning as discovery and transformation
Learning in the market according to Kirzner, consists of a transformation of a non-means into a means at least to the individual who experience it. If an individual subconsciously learns that his perilous subconscious vision enabled him to gain in a market. Later he experiences a similar choice situation. At the later time, his knowledge, not his vision would enable him to make a correct choice. At the time that the vision is discoursed, it gets transformed into F.O.P knowledge. This alertness, subconscious learning, and entrepreneurship are discovery processes.”
c)Encouragement of subconscious learning in a market
Subconscious learning in the market can be encouraged in two ways according to Kirzner.
It can be encouraged by others advertising if the advertiser profits his message to the potential consumer, or with conic illustration or a compared by a certain piece of music surely this is because the advertiser knows hot merely how to lower the cost to the consumer of learning his message but how to encourage spontaneous learning by the closure with no deliberate search for all”
Subconscious learning can be encouraged by institutional arrangement; institutional arrangement determines the gains that are available to different individuals when they subconsciously learn, because subconsciously learning in some individuals is superior to that in other, it’s important that those who are superior receive higher gains.
4)Entrepreneurship as Equilibrating
From a Logical Definitional Standpoint, Kirzner’s Notion of Entrepreneurship as Equilibrating Combines Three Ideas
•The first is the subconscious learning is equilibrating to the isolated actor.
•That subconscious learning about arbitrage opportunity is equilibrating in markets.
•The subconscious learning would lead to a general equilibrium of there were no changes in the non-entrepreneurial determinants of DD and SS.
He states that, it’s only entrepreneurship which might eventually lead to equilibrium (Kirzner 1999).
a)Subconscious learning is equilibrium:The tendency of purposeful human beings to become aware of available opportunities (by means subconscious learning tends, with greater or lesser rapidity, to eliminate misallocation error. From Kirzners view point, misallocation of resources means wrong decisions and these would lead to disequilibrium.
b)The subconscious learning about arbitrage opportunities is equilibrating in the market in the market economy, what Kirzner calls the “entrepreneurial element in individual decision making “impacts through arbitrage. Like the isolated individual, the arbitrageur behaves according to subconscious vision. he a observes price and follows his subconscious vision to arrange an exchange a cow dollar value and a buyer who attaches a higher dollarvalue given that his visionis correct, the result is entrepreneurial or market “profit”
c)Subconscious Learning Win Lead to General Equilibrium: Kirzner says that just as there is a tendency for arbitrage to lead to equilibrium in a particular market there is also a tendency for it to lead to an optimum general equal or equity in all markets. An equal state is one in which to further learning resisting from following subconscious vision is possible all the Knowledge of wants abilities and knowledge that the economists assumes to be element from the stand point of supervisor insight has been acquired by the various individuals.
Cassion’s theory of Entrepreneurship
Like Schumpeter and Kirznercasson is another author who tried to advance the economic theory of entrepreneurship Casson (1982) specifically defines an entrepreneur as someone who specializes in taking judgmental decision about the coordination of scarce resources after identifying new opportunities the entrepreneurs persona comparative advantage lies in processing information which requires considerable judgment. This is because the information collected is sometimes conflicting and often incomplete.
In one of his essays on entrepreneurship Casson says the not effective way to synthesize the lights of transactions of the firm is to build the theory of the firm around the personality of the entrepreneur. The theories that neglect the entrepreneurial dimension in explaining the behavior of the firm can only after a partial explanation...
He continues that an entrepreneurial theory of the firm can encompass all the major issues regarding the nature of the firm like the boundaries of the firm the formation, the internal organization of the firm, the growth and diversification of the firm and the role of the entrepreneur which he argues to be the most fundamental.
Caisson’s theory from Economic Perspective Considered Four Categories
As the economy undergoes some economic changes, newer and better methods of dealing with such changes are initiated by the entrepreneur. This is because he is the one who can observe such opportunities through information synthesis and makes considerable judgment of this information to make a gain out of it.
Successful entrepreneurs must be optimistic and self-confident in order to compete for resources (Rss) from rival entrepreneurs and to like with risk but their judgment may turn out to be wrong the uncertain judgment. To obtain widest possible synthesis of the latest information, they cultivate networks of social contacts that feed them the information they require for making judgment decisions
Caisson emphasizes here that information (knowledge) is very important he argues that all other things being equal; it’s the optimistic and self-confident entrepreneur who will prevail- whereby he takes a more favorable view of the economic environment than others,and is therefore prepared to pay more for, the Rss for which they are competing. In this way are competing. In this way the entrepreneur believes to have better knowledge than the others and outcome of his judgment becomes less certain.
iii) Entrepreneurial Businesses
The trend here is that as changes occur in the economy entrepreneur’s getter as much information as possible. Then competition impacts on the entire market situation resulting in improvement inform of new business, normally one phase of entrepreneurship triggers off subsequent phases, for example which includes new firm formations; partnership formations; diversification; inter firm joint ventures; merger; and growth through learning such improvement automatically lead to economic growth.
If an economy is in equilibrium there are unexploited gains to be made An entrepreneur is someone who notice some of the opportunities for profitable trade and exploits them returning to the original equilibrium position can either be achievement through increasing or decreasing price, or through increasing or decreasing qualities entrepreneurs normally anticipate such changes and plan in advance how to exploit them and gain out of them entrepreneurs therefore move the economy to equilibrium.
Caisson attempts to identify a shared element between Schumpeter is Kirzners and his theory by introducing the concept of entrepreneurial judgment. The attempt to identify a shared element suggests that caissons theory has generality and may be applied to all kinds of entrepreneurship. In Caisson’s view, the concept of entrepreneurial judgment is of paramount importance which is based on individuals their perceptions and the information that they have available or choose to acquire.
Central to this concept is the recognition that different individuals will make different outhouse because information is necessarily impotent and costly to acquire in cognizance of this, Casson recounts that the entrepreneurial theory of the firm suggests that a market economy driver by practical judgment through a proper synthesis and coordination of information mainly around the personality of the entrepreneur, is likely to prove the most successful
Chapter - 2
Types/Classification of Entrepreneurs
Literature on entrepreneurship is paying greater attention to the diversity of entrepreneurs. Certain characteristics of the firms and the entrepreneurs who own them can be more easily and clearly understood if we group and classify certain types of entrepreneurs differently. The following are some of the distinctions that can be used to classify entrepreneurs.
Motivation to Engage in Entrepreneurial Activity
Push (Forced): Push entrepreneurs are those whose dissatisfaction with their current position for reasons unrelated to their entrepreneurial characteristics, pushes them to start a venture.
Pull Entrepreneurs: Are those who are lured by their new venture idea and initiate venture activity because of the attractiveness of the business idea and its personal implications.
“Push” and ‘pull’ Entrepreneurs: Are combinations of the above two. They are normally more motivated and thus outperform other types of entrepreneurs. However, “push” entrepreneurs were found to be more successful than ‘pull’ entrepreneurs. They are more determined and persistent because they normally have nothing to fall back to.
Levels of Creativity and Innovation
Innovative Entrepreneur: Assemble a large variety of information and combine a range of factors experimentally to produce new possibilities in terms of markets, techniques, or products. Countries with a very underdeveloped industrial base hardly produce this type of entrepreneur, because of lack of the necessary infrastructure.
Imitative (Adoptive) Entrepreneurs: They imitate and adopt the technology and techniques innovated by others. They are particularly important in underdeveloped countries although not highly regarded in more developed economies. However, imitative entrepreneurs also need to be creative in order to modify innovations to suit their special conditions.
Opportunistic Entrepreneurs: They constantly look for and exploit serial opportunities because of their wide skills and knowledge accumulated from a wider educational background, experience or exposure. They start by exploiting small opportunities seeking and exploiting a series of, often varied, opportunities as they grow. They ambition involve building large organizations and are not afraid of borrowing to achieve this growth. They usually find it easy to delegate and hire competence.
Visionary Entrepreneurs: They have almost similar characteristics to the opportunistic Entrepreneurs however, while “opportunistic” entrepreneurs pursue, serial business opportunities, the “Visionary” entrepreneurs, concentrate on the unwavering pursuit of a single, powerful opportunity. In Practice, this fixation may represent a false opportunity’ that is ahead of its time or falls to consider significant obstacles to implementation.
Craftsman entrepreneurs: They own the businesses in which they operate, but tend to restrict their business to their individual skills and experiences usually accumulated from limited education and exposure. They have minimal growth ambitions, keeping their enterprises small as a means of maintaining control. Control is normally autocratic, with little delegation and strong paternalistic attitudes towards their workers. They avoid risk and the use of loan money. Normally, they are not marketing oriented preferring to build very strong with their existing customer.
Drone Entrepreneurs: At some instant in their business, craftsman entrepreneurs are so comfortable with their achievements that they decide not to tamper with what they consider a winning formula. Those entrepreneurs that will not change under any circumstances are referred to as drone entrepreneurs. Slowly but surely, this entrepreneur will be forced to close.
Fabian Entrepreneurs: Are also reluctant to change, but are sometimes forced by circumstances to change. They respond very slowly to changes in the market, and this affects their growth and competitiveness. However, by following a proven path, these entrepreneurs are protected from the uncertainty of new innovations; they are therefore likely to survive for a long time. They however grow very slowly or do not grow at all because they fail to exploit new innovations that are normally more profitable.
Solo Entrepreneurs: At the level of organization these are entrepreneurs who developed their business ideas on their own. The solo entrepreneur is limited to his means and capabilities.
Network Entrepreneurs: These are entrepreneurs who get their ideas from the social networks, and develop them suing the networks are found. These network entrepreneurs can draw from the means and capabilities within the network to supplement his individual means and capabilities. The network entrepreneur is therefore more likely to grow better and faster.
Coprenuers: Are entrepreneurial couples that work together as co-owners of an enterprise. Although some scholars consider business co-ownership a recipe for divorce, some researchers have described it as an exciting proposition that involves nurturing and growing, a business with someone you love – much like raising a child. It is important, however, to first build a successful relationship before launching the enterprise.
Individual and Institutional entrepreneurs – Most start-up firms are dominated by entrepreneurs acting individually, or coming together individually. However, as the business grows and becomes more complex, it becomes imperative to develop the entrepreneurial skills through a corporate body.
Part Time Entrepreneurs: Starting business on a part time basis is a popular gateway to Entrepreneurship that allows one to get the best of both worlds by getting the benefits of Entrepreneurship and the security of a regular salary. It also allows part timers to hedge against the risks of a venture flop, and tests the waters before making the final commitment. Part time entrepreneurs are normally suited for young enterprises because as enterprises grow, they tend to take up more time until the entrepreneur decides to become full time.
Corporate cast off and dropouts: Are produced by retrenched and retiring employees and have become an important source of entrepreneurial activity. Armed with adequate experience, severance packages, knowledge of the industry, and a network of connections; these former employees will normally have better start up options and a higher chance of entrepreneurial success.
Under Further Study of Entrepreneurship, Entrepreneurs Have Also Been Classified According to
•Male or female entrepreneurs.
•Rural or urban entrepreneurs.
•Small and large-scale entrepreneurs.
•First, second and third generation entrepreneurs.
Importance of Entrepreneurs
1.They bring technology intensive, often risky, innovations to the commercial market – and in the process, even help to develop whole new industries. Entrepreneurs are driving a revolution that is transforming and renewing economies worldwide. While in Uganda we still depend on the same commercial products introduced almost a century ago for our economic growth, the USA gets more than half of its economic growth from industries that barely existed a decade ago.
2.Entrepreneurship through innovation is the heart of economic progress. It is the very basis of any nation’s economy and wellbeing.
3.Entrepreneurs are the source of innovation, which is believed to be, the heart of economic progress. Innovation is the very basis of any nation and community’s economic progress.
4.Entrepreneurship is the catalyst that enables a country to compete more favorably in the global market place. It enables nations to compete in the global market place as respectable stakeholders and not beggars at the mercy of others.
5.Entrepreneurial innovation raises the prospects for more productive and satisfying lives by supplying new effective tools and methods, and solutions to problems and inconveniences. Entrepreneurship is the essence of free enterprise because the birth of new businesses gives a market economy its vitality.
6.New ideas alter the fabric of society and keep the world fresh and moving forward. New and emerging businesses creates a very large proportion of innovation products and services that transform the way we work and live, such as personal computers, software, the Internet, and drugs.
7.Entrepreneurs are creators of jobs. It is a fact that entrepreneurship and employment go hand in hand. As new products and services are introduced, more staff will be required to produce, sell, and deliver them.
8.An important aspect of entrepreneurship is social entrepreneurship. In this case, the objective is not make profits per se, but to achieve social good through the similar process of identifying opportunities, exercising creativity, and building new structures. It is no accident that business entrepreneurs are also well equipped to play a role to champion social causes.
9.Entrepreneurs, in an effort to market and promote their enterprises support churches, schools, and communities, produce goods, feed a hungry world, and keep their homes and families, while they invest in the future to build a better community.
10.Entrepreneurial success comes when they can anticipate and deliver what the consumers want and it in a way that satisfies them. Entrepreneurs understand that making money begins with giving. Entrepreneurship works best and creates the greatest wealth and human progress for all when it aims at satisfying customers.
11.Entrepreneurs turn worthless waste, weeds, rocks and other undesirable into coveted riches. Oil was worthless until entrepreneurs with ideas and the freedom and faith to take risks managed to locate it, extract it, and put it to work for humanity.
12.Governments balance their budgets by stimulating new wealth, wealth from investment attributed to entrepreneurs.
13.Entrepreneurs are and have always been leaders in communities and nations.
14.Entrepreneurs help to keep industries relevant by creating the necessary timely innovation. They help the industry to evolve slowly, maintaining stability and measured change at the same time. They help to maintain the industry at “the edge of chaos,” where the components of a system never quite look into place, and yet never quite dissolve into turbulence either.
Benefits of Entrepreneurship
Research shows that people who seek a career in entrepreneurship work harder and take higher risks than people employed in the regular salaried jobs. However, more and more people are joining entrepreneurship, and more still are starting too serious consider it’s a viable and interesting career option. This is mainly because of the following reasons:
An Opportunity to Gain Control Over One’s Destiny: entrepreneurship provides n entrepreneur the opportunity to achieve what they consider to be important. Entrepreneurs are noted or wanting to always be in full control of their lives, and entrepreneurship enables them to achieve the full control they desire.
An Opportunity to Make a Difference: Entrepreneurship enable participating individuals to makes a difference in any a matter that is of importance to the individual.
An Opportunity to Reach Ones Full Potential: Working for or under other people will normally create barriers to one’s development in terms of rules, policies, precedence and acceptable procedures. Entrepreneurship is an instrument that allows entrepreneurs to challenge all their skills, abilities and endurance without any external limitations.
An Opportunity to Make Lots of Money: Although money may not be the primary motivator of entrepreneurs, it is still recognized as an important motivation. Owning their own businesses give entrepreneurs the opportunity the opportunity to earn salaries, dividends and profits; making so much cash in the process.
An Opportunity to Contribute to Society and to be recognized for it – An entrepreneur is always associated with his or her businesses, its products and its services. In an effort to generate profits, they contribute to the development of society and in the process become recognized for their efforts.
An Opportunity to enjoy one’s Work: Entrepreneurship is about doing what one enjoys.
Barriers to Entrepreneurship
Barriers to entrepreneurship are factors that hinder the development of entrepreneurship. They hinder people from acquiring the practicing entrepreneurial skills, but also prevent practicing entrepreneurs form achieving the full benefits that entrepreneurship has to offer. Many of these barriers are mainly perceptual obstacles, rather than any concrete, objective obstructions in the way of making the entrepreneurial decision. Barriers can arise from the social, economic and political environment with which the individual interacts. They can also be caused by the adverse conditions within the organization with which the individual works. However, most barriers are a direct result of an individual’s failures and weaknesses.
Barriers or Threats at the Individual Level
Individual Weaknesses: This poses the biggest threat to entrepreneurship in Uganda. Such barriers are ignored, as focus is normally on the environmental factors. Since one can easily act to remedy these weaknesses they usually form the main focus of entrepreneurship training programs. Barriers at the individual level would include:
Poor Entrepreneurial Skills: Most entrepreneurs and potential entrepreneurs are short on entrepreneurial skills. They are risk adverse, lack creativity, innovation, endurance, flexibility, and other entrepreneurial characteristics. This means that many people will start business that are images of existing businesses resulting in very intense competition in very narrow fields that provide little returns for the investors. Entrepreneurial characteristics can help businesses people to look for and exploit new opportunities.
Lack of Business and Technical Skill: Business skills in marketing, accounting, management, etc… are required by all practicing entrepreneurs to effectively manage their entrepreneurial ventures. Many ventures also require specialized technical know how to set up, operate and manage. Lack of such skills many times limits the capacity of entrepreneurs to effectively exploit the full potential of their ventures. Moreover, owing to the high rate the illiteracy, many enterprising individuals even lack the capacity to appreciate and acquire these skills.
Low mobility and Exposure: Mobility and exposure normally offers the biggest revelation for new ideas that shape creativity and innovations that shape entrepreneurship. However, Ugandans generally do not travel widely, do not read widely and do not explore, ask or investigate. As a result, even highly educated people remain largely narrow minded. This limits the creativeness and innovativeness of Uganda’s potential and practicing entrepreneurs.
Lack of Role Models in Entrepreneurship: Uganda is seriously short of role models in the field of entrepreneurship, which limits the number of people who willingly aspire for a career in entrepreneurship. Many people have a very low opinion of struggling entrepreneurial upstarts, while they consider the few successful entrepreneurs to be super lucky individuals who can only be admired but not be emulated. As a result, very few people are attracted to entrepreneurship as a career of choice. Most are forced into entrepreneurship as a last resort, without enough interest and commitment. Inspiration is a key characteristic of entrepreneurship. New entrepreneurs need to be inspired entrepreneurs that they admire.
Lack of Business Ethics: Many entrepreneurs have failed, or been compromised, because of unethical behavior. Unpaid loans, unpaid or highly exploited employees, unpaid suppliers, substandard goods, tax evasion, corruption, smuggling etc. characterize many business ventures in Uganda today. While such tendencies may sometimes result in a quick profit, many times these ills come back to haunt the entrepreneur, many times crippling them completely.
Complacency (Lack of Motivation): Because of lack of role models and limited exposure, entrepreneurs in Uganda tend to be satisfied with relatively small and modest achievements. They tend to have little motivation for higher or extraordinary achievement. The tendency to prematurely celebrate success limits the growth of many entrepreneurial ventures.
Lack of Continuity: Very few firms in Uganda are known to survive the death of their founders. Very few entrepreneurs have the opportunity to pass on their enterprises to new generations and watch from the side as the enterprises continue to prosper. Moreover, many firms are known to change business or diversify very fast before gaining he required experience. Lack of continuity affects the learning cycle of the firm and the entrepreneur and therefore the long-term competitiveness of the enterprise.
Career Dependency: Ugandans especially the educated have long been dependent on their careers to provide for their livelihoods. Entrepreneurship has for long been regarded as a last resort effort mainly reserved for the under-educated. Although this mindset is rapidly changing, its effect is still a big barrier to entrepreneurship in Uganda.
Uncertainty of Income: In most cases the initial stages of the entrepreneurial career are filled with uncertainty, and many entrepreneurs will not have enough money even for their basic survival. There is no regular income, and many entrepreneurs are forced to draw from their savings. This is the most trying stage of any entrepreneur.
Risk of Losing the Entire Investment: Business failure is a reality that threatens entrepreneurs at all level, but most especially the new enterprises. Business failure will result not only in the loss of a job, but also the entire investment and sometimes the entire livelihood. This threat becomes even greater for entrepreneurs who mortgage all their savings and assets to finance their enterprises.
Long Hours of Hard and Challenging Work: Without adequate support structures and resources, entrepreneurs have no option but to engage their own mental and physical energies to move their investments especially during the early stages. Hard work and long hours is therefore a reality of many an entrepreneurship career.
High levels of Stress: The pressure of hard-long hours of work and the uncertainties associated with entrepreneurship result in highly stressful life styles for entrepreneurs. Most entrepreneurs put significant investments in their enterprises, have no steady incomes, have mortgaged everything to finance their businesses, and the line between their success and their failure is every thin; causing enormous anxiety and stresses to the entrepreneur.
High Levels of Responsibility: Entrepreneurship brings the thrills of being the boss, but also the responsibility for decisions that not only affect the entrepreneurs and their families, but also the livelihood of employees, suppliers and other stakeholders who somehow depend on the firm for their own survival.
Barriers Arising from The Environment: The environment also presents numerous barriers to practicing and prospective entrepreneurs in Uganda. Some of these barriers are discussed below:
The Political-Legal Environment: Political Instability has dogged different regions of Uganda for the past 40 years. This state of affairs has robbed Uganda of many entrepreneurs, and many more entrepreneurs have lost lifetime savings and business assets, while others have been forced by Instability to close. This affects continuity and experienced and resource accumulation are essential in today’s competitive environment.
Business Administrative Procedures: In many cases, the business environment is dominated by complex and burdensome regulations, favoritism, corruption, and weak enforcement mechanisms. As a result, businesses are forced into the informal economy, countries are unable to attract investment, and participation of the private sector in the decision-making process is limited. As a result, businesses are forced into the informal sector, and the country is unable to attract investment, and the participation sector in decision making is limited.
Government Economic Policy: The formulation and delivery of business policy is based on a narrow conception of conventional big businesses and a consequent lack of specific attention to the circumstances and needs of entrepreneurs. Moreover, the bulk of government’s monetary and fiscal policies are aimed at appeasing the donor agencies and multilateral financial Institutions, many times at the expense of business in general and entrepreneurs in particulars.
Insensitive Government Institutions and Departments: Entrepreneurs blame government Institutions and departments for having little qualification and a minimal appreciation and understanding of the importance of business and business formation among entrepreneurs. This limits entrepreneurs’ access to these Institutions as support mechanisms or potential clients. Arbitrary Interpretation of the regulations b officials has cost many entrepreneurs much time and money.
Excessive, Complex, and Arbitrary Taxation: The tax system in Uganda is complicated, voluminous, confusing, changes rapidly and in most cases beyond the comprehensive of the entrepreneur. The tax administration is arbitrary and many times misunderstood, resulting in Adhoc tax administrative solutions which foster rampant corruption. Very high taxes also serve to discourage potential entrepreneurs.
Economic Environment
Lack of access of Finance: Banking System and Practices in Uganda impose impossible demands on entrepreneurs. Banks have little incentive to extend credit. The term of credit are unreasonable, requiring difficult collateral and guarantees to secure the loan. Borrowers default on their loans, resulting in high interest rates which are a very heavy burden to could be entrepreneurs. Additional burdens include unreasonable demands, for audits, inspections, and documentation; and the incompetence and insensitivity of most banking staff.
Low Purchasing Power: Low incomes and a high rate of unemployment limit the purchasing power of a relatively small Ugandan population. This makes it hard for businesses in general and entrepreneurs in particular to acquire the necessary economies of scale.
Poor Infrastructure: Uganda is still plagued with a very poor physical and social infrastructure in terms of roads, electricity, water, bridges, schools and hospitals. These hinder business development in many parts of the country, and act as barriers to entrepreneurship.
Economic Instability: Due to over reliance on donor assistance, borrowing, the import bill that far outweighs the export earnings, and over reliance on imports, the Ugandan economy is very fragile and easily destabilized by any small shocks in the international environment.
Social Barriers to Entrepreneurship
The Social Environment May Also have Certain Aspects that act as Hindrances to Entrepreneurship. Such Hindrances Include the Following
•Lack of adequate social support groups to support entrepreneurs and innovators who are out to challenge the status quo.
•Many socio-cultural settings get stuck in the traditional ways and norms – they are not willing to change these norms. This situation discourages people from trying anything new and acts as a barrier to creativity innovation and entrepreneurship.
•In many of our communities, there is a stigma attached to failure. People look down upon failed attempts, preferring those that do not tray at all. This works to discourage experimentation and entrepreneurship.
Barriers Arising from the Employing Firm
There are also issues internal to the organizations that serve to block entrepreneurial tendencies within the firms. When entrepreneurship within the firms is obstructed, it has a negative impact on the general level of entrepreneurship within the community. Barriers within the firms include:
•Too much bureaucracy.
•Inadequate communication and consulting within the organization.
•Slow decision making resulting from bureaucracy and lack of effective communication are familiar to many who work in large organization.
•Strong and rigid punishments for those who make mistakes and those who divert from the accepted norms create an aversion to risk and failure. People become too timid to make bold decisions and stand out from the crowd. Employees fear that they will be blamed if things go wrong and that it is better to keep their heads down.
•Lack of resources.
•Poor and inequitable reward for entrepreneurial effort tends to kill the enterprising spirit.
Solutions to Barriers of Entrepreneurship
To achieve successful Entrepreneurship Development, three elements stand out, namely; the individual, The Environment, and the firm.
The Individual
The MAIR model suggests four factors that have to come together in order to create an entrepreneur. These are Motivation, Ability, Ideas and Resources. These factors form the acronym MAIR by which the model is known as:
Motivation: Refers to the force that influences an individual to opt and take up Entrepreneurship as a career. These may be PULL and PUSH factors. Individuals react differently to these stimuli, therefore are motivated by different factors. Recognizing and rewarding innovation is a key motivating factor.
Ideas: Ideas are starting point for any entrepreneurial venture, however not all ideas will be viable or marketable. The ideas of interest to ED are the ones that are both viable and marketable. The challenge of ED is to support and encourage innovations through actively exposing people to new ways, products, methods and information.
Ability: For nay enterprise to survive, it requires a constant supply of relevant skills from both the owners and the employs. Although some of skills are naturally endowed to certain individuals, the majority are acquired through training, observation, experience, experimentation. Individuals need entrepreneurial and business skills as well as technical skills relevant to the industry to start and grow enterprises. The challenge of ED is to propagate these skills widely and effectively in order to support entrepreneurship.
Resources: Any enterprise will require resources to survive and thrive. While some resources are naturally endowed to an individual, a firm or a nation (community), the majority of resources must be sourced, and entrepreneurs will need to have the ability to acquire resources. The challenge of ED is to enable the individual to obtain the necessary resources to operationalize their ideas and to create easy and affordable means access to resources.
The Environment
Entrepreneurship and ED will be successful only where there is a conducive environment for them to flourish. The following environment factors are critical to the growth of entrepreneurship: Economic environment, challenging circumstances, external rewards for entrepreneurship, training facilitates, external leadership and learning opportunities.
The Economic Climate: In general, an environment that is ideal for business growth is conducive to entrepreneurship. Four areas are particularly pertinent.
Government Economic Policy (Monetary, Fiscal & Regulatory): Expansionary monetary policy is more conducive to entrepreneurship development than contractionary: Fiscal policy is more to government revenue and expenditure and the expansionary fiscal policy is more conducive to ED. Situations where government leaves the forces of demand and supply to control the distribution of resources allows Entrepreneurship to flourish, since it has more rewards for the innovations.
Infrastructure should be well developed and maintained to ease communication. But also, government institutional policies and practices should open up their services to entrepreneurs.
The financial systems including banks and non-bank intermediaries, securities markets, and financial instruments like treasury bills, bills of exchange, credit cards, cheques etc. must exist and operate efficiency to aid business transaction.
Legal Framework: should not be too stringent to inhibit Entrepreneurship, but should be clear and effective enough to provide adequate protection to entrepreneur against fraud.
Challenging Circumstances: Challenging circumstances tend to bring out latent creativity in people, and lack of challenge breeds complacency. Competition for jobs and resources are good examples of challenging circumstances. ED involves giving room for creativity and innovation and eliminating the fear of making mistakes as a way tackling these challenging situations.
External Rewards for Entrepreneurship: How the society recognizes and rewards entrepreneurs is important for Entrepreneurship development. Entrepreneurs should be the first beneficiaries of their innovations. Situations where pirates and copycats take the profits from other people’s innovations are not good for Entrepreneurship Development. Benefits should not only come inform of profits, but recognitions in form of awards, role modeling, special considerations etc.
Training Facilitates and Learning Opportunities: Availability and quality of training facilitates and Entrepreneurship Development programs and supply of role models for the young generations to emulate. Stimulate the teaching entrepreneurship within educational institutions to enable students read patterns and trends so as to envision the future the future, and integrate knowledge acquired in responding to society needs.
External Leadership: Business leaders, political and cultural leaders, and technological leadership can play a big role in Entrepreneurship Development. Business leaders can encourage an environment that allows generation and growth of new ideas. Political leaders can set policies that support the development of Entrepreneurship, but can also participate directly by setting up business, mobilizing and supporting people into entrepreneurship, and generating new ideas and passing them to the public. Entrepreneur support groups could be developed.
The Firm
Internal and External Interrelationships have a Strong Influence on Entrepreneurship. These Will Include Factors Such as
Organizational Culture: These are acceptable norms and behaviors within the organization. If these permit new idea generation and implementation, then the culture is supportive of ED. This requires flexibility in operations and openness to change. It should support experimentation and tolerate some degree of failure as a natural consequence of innovation.
Organizational Structure: Define the reporting relationships and interdepartmental communication. If the structure allows a smooth flow of ideas and permits even lower level technical staff to exercise their creativity. To support ED, the organization needs to open up channels of communication, encourage frank exchange of ideas and freedom of interaction at all levels.
Leadership: A strong leadership is required to direct change, which is the driver of innovation. Leadership should actively participate and support constructive change.
Reward structure: Organizations should be able to recognize innovation and reward it appropriately. This requires formulating means of measuring entrepreneurial effort so that reward is dispensed in a fair and equitable manner. Reward can be in form of recognition, material, or promotion.
Chapter - 3
The Entrepreneurial Process
The entrepreneurial process involves all the functions, activities and action associated with perceiving opportunities and creating organizations to pursue them.
The process of starting a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. The process has five distinct phases.
i)Identification of opportunity – idea generation.
ii)Evaluation of the opportunity.
iii)Development of the business plan.
iv)Determination of the required resource, and
v)Management of the resulting enterprise.
Although these phases proceed progressively, no one stage is dealt with in isolation or is totally completed before work on other phases occurs.
1)Identify the Opportunity
A person gets an idea for a new business either through a deliberate search or a chance encounter. Where do would be entrepreneurs get their ideas? More often than not it is through their present line of employment or experience.
Ideas, Inventions & Innovations
Everybody has ideas; ideas are relatively easier to come by compared to inventions. It takes knowledge, time, money and effort to refine and idea into a workable invention. Turning an invention into an innovation-a new product launched into, and accepted by the market place – takes even more effort and a little luck. Inventors are individuals who conceive a new product, process or services. Typical inventors have neither the interest nor the resources to commercialize their inventions. Innovators are people seek to commercialize inventions.
Innovation may be defined as a complex series of activities, beginning with an idea and followed by a succession of interwoven steps – research and development, financing, marketing and production. Innovation is only completed when the market accepts a product, process or service.
Entrepreneurship is identified with innovation. Innovation does not always mean inventing something physical (technological innovation), but could involve redefining the way something is done (social innovation).Innovation is the specific instrument or entrepreneurship. It is the act that gives resources the capacity to create wealth. Innovation creates resources. There are no resources until entrepreneurs find a use for it through innovation.
Drucker (1986) Looks at Seven Major Sources of Innovation That Include
1.The Unexpected Success, Failure or Unexpected Event: Keeping track of what is going on in the firm, the industry, the economy and the environment. Monitor these activities as they have a high indicator of change that has occurred or is waiting to happen many people ignore. Failure normally frowned upon without examining the root cause of failure that could highlight new opportunity.
2.Incongruities are Discrepancies or Dissonances Between “what is” and “what was expected”: Incongruities are a sign of change that has occurred, and therefore a sign of opportunity.
3.Process Needs: Necessity is the mother of invention. Once a need is felt the innovator identifies what is need, and how it can be produced. This involves understanding the problem, accumulating knowledge of how it can be produced. This involves understanding the problem, accumulating knowledge of how to satisfy the need, and fitting the solution within people’s expectations.
4.Industry and Market Structure: Many times last a long time, and are sometimes considered part of the order of nature destined to endure forever. In reality however, these structures are quite fluid and can be dismantled-sometimes with little effort. When such a change occurs, everyone in the industry has to act, giving an opportunity for innovation. Industry and market change are likely to change if the industry grows very fast, convergence of technologies or development of new technologies. Outsiders usually see the opportunities while insiders see them as threats.
5.Demographics: Define changes in population size, age structure, composition, employment, educational status and income. The consequence of these changes can be predicted and are o good driver of innovation. However, it is common for established firms to ignore these changes if they do not conform to their expectations giving an opportunity to innovators.
6.Change in Perceptions: The way people perceive situations is constantly changing. Understanding these perceptions will help people innovate (health and fitness, healthy foods, security).A change in perception does not necessarily change facts; it changes the meaning of already existing facts. Timing is a critical factor in innovations based on perceptions because perception changes very fast and some of them are fads that disappear within a short time.
7.New knowledge: Knowledge based innovation is the most publicized and recognized innovations. The knowledge may not necessarily be scientific or technical. It can be social. It is characterized by a long-time frame, large casualty rate, unpredictability, and the big challenges it poses to the entrepreneur. These innovations are normally a convergence of several different kinds of knowledge from a variety of disciplines.
2)Evaluating the Opportunity – Feasibility Study
Whether the opportunity is identified by using input from consumers, business associates, channel members, or technical people, each opportunity must be carefully screened and evaluated. This evaluation of the opportunity is perhaps the most critical element of the entrepreneurial process, as it allows the entrepreneur to assess whether the specific product or service has the returns needed compared to the resources required.
This evaluation process involves looking at the length of the opportunity, its real and perceived value, its risks and returns, its fit with the personal skills and goals of the entrepreneurs and its uniqueness or differential advantage in its competitive environment.
The market size and the length of the window of opportunity are the primary basis for determining the risks and rewards. These risks reflect the market, competition, technology and amount of capital involved.
The amount of capital needed provides the basis for the return and rewards.
The methodology for evaluating risks and rewards frequently indicates that an opportunity offers neither a financial nor a personal reward commensurate with the risks involved.
Finally; the opportunity must fit the personal skills and goals of the entrepreneur. It is particularly important that the entrepreneur be able to put forth the necessary time and effort required to make the venture succeed.
Opportunity analysis, or what is frequently called a feasibility study, is one method for evaluating opportunity. It is not a business plan
A feasibility study includes the following; a description of the product or service, an assessment of the opportunity, an assessment of the entrepreneur and the team, specifications of all the activities and resources needed to translate the opportunity into a viable business venture, and the source of capital to finance the initial venture as well as its growth.
3)Developing a Business Plan
A good business plan must be developed in order to exploit the defined opportunity. This is a very time-consuming phase of the entrepreneurial process. A good business plan is essential to developing the opportunity and determining the resources required, obtaining those resources and successfully managing the resulting venture.
4)Determine the Resources Required
The resources needed for addressing the opportunity must also be determined. This process starts with an appraisal of the entrepreneur’s present resources. Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount of variety of resources needed. The downside risks associated with insufficient or inappropriate resources should also be assessed.
5)Manage the Enterprise
After resources are acquired, the entrepreneur must use them to implement the business plan. The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure as well as determining the key variables for success.
A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the ventures they created.
Entrepreneurship is the practice of embarking on a new business or reviving an existing business by pooling together a bunch of resources, in order to exploit new found opportunities.
Intrapreneurship is the practice of entrepreneurship by employees within an organization.
In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur, to mean "A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation".
Intrapreneurs are employees who work within a business in an entrepreneurial capacity, creating innovative new products and processes for the organization. Intrapreneurship is often associated with larger companies that have taken notice of the rise in entrepreneurial activity in recent years; these firms endeavor to create an environment wherein creative employees can pursue new ways of doing things and new product ideas within the context of the corporation. But smaller firms can instill a commitment to intrapreneurship within its work force as well.
Difference between an Entrepreneur and an Intrapreneur
An entrepreneur takes substantial risk in being the owner and operator of a business with expectations of financial profit and other rewards that the business may generate.
On the contrary, an intrapreneur is an individual employed by an organization for remuneration, which is based on the financial success of the unit he is responsible for.
Intrapreneurs share the same traits as entrepreneurs such as conviction, zeal and insight.
As the intrapreneur continues to expresses his ideas vigorously, it will reveal the gap between the philosophy of the organization and the employee. If the organization supports him in pursuing his ideas, he succeeds. If not, he is likely to leave the organization and set up his own business.
Features of Intrapreneurship
Intrapreneurship involves innovation, the ability to take risk and creativity. An Intrepreneur will be able to look at things in novel ways. He will have the capacity to take calculated risk and to accept failure as a learning point. Central to ‘intrapreneurship’ is the concept of empowering yourself as an employee. This can entail different things depending on the specific goals and aspirations of the individual. It may include:
•Negotiating flexible hours with your employer; instead of ‘clocking in’ and ‘clocking off’ from the office at set times, you instead commit to completing specific tasks within a given time period. The hours during which you complete the tasks are left up to you.
•Working from home for a portion, or even all of the week.
•Assisting on tasks or projects that you have a strong interest in but that fall outside of your prescribed duties and job description.
•Initiating projects, products or services on behalf of the company to bring in additional revenue. This might also entail you receiving a commission.
•Getting your employer to pay for or subsidize your study of subjects that complement the business.
An intrapreneur thinks like an entrepreneur looking out for opportunities, which profit the organization. Intrapreneurship is a novel way of making organizations more profitable where imaginative employees entertain entrepreneurial thoughts. It is in the interest of an organization to encourage intrapreneurs. Intrapreneurship is a significant method for companies to reinvent themselves and improve performance.
Another important factor that led to the choice between entrepreneurship and intrapreneurship was age. The study found that people who launched their own companies were in their 30s and 40s. People from older and younger age groups were risk averse or felt they have no opportunities, which makes them the ideal candidates if an organization is on the lookout for employees with new ideas that can be pursued.
Entrepreneurship appeals to people who possess natural traits that find startups arousing their interest. Intrapreneurs appear to be those who generally would not like to get entangled in startups but are tempted to do so for a number of reasons. Managers would do well to take employees who do not appear entrepreneurial but can turn out to be good intrapreneurial choices.
Types of Intrapreneurship
Different Organizations Approach Intrapreneurship in Different Ways. Below are some of the Common Approaches
Administrative Intrapreneurship: The company forms an administrative arm (normally called the research and development – R &D Team) to spearhead and encourage greater creativity and innovation.
Opportunistic Intrapreneurship: The Company opens up its structures to allow individuals to pursue opportunities both internal and external to the organization, with the company using its resources to exploit the new innovations it finds attractive.
Acquisitive Intrapreneurship: The organization looks out for other firms and entrepreneurial start-ups that have developed, tested and perfected new innovations that could be beneficial to their operations. They then acquire the innovative firms or their innovations through mergers, takeovers, joint ventures, licensing agreements, buy outs etc...
Imitative Intrapreneurship: Firms copy and take advantage of other firms’ innovations, and employ their corporate muscle and superior resources to control the market for the new product or service.
Incubative Intrapreneurship: The Company creates new terms as semi-autonomous new venture development units, provides them with seed capital and allows them independent action to develop an idea from inception to commercialization. The company can then reintegrate the innovation into its mainstream operations once market viability has been proven.
Organizational Characteristics That Encourage Intrapreneurship
The single most important factor in establishing an "intrapreneur-friendly" organization is by making sure that employees are placed in an innovative working environment. Rigid and conservative organizational structures often have a stifling effect on intrapreneurial efforts. Conservative firms are capable of operating at a high level of efficiency and profitability, but they generally do not provide an environment that is conducive to intrapreneurial activity and organizations that do not encourage creativity and leadership often alienate talented employees. Erik Rule and Donald Irwin stated in Journal of Business Strategy, companies do establish a culture of innovation through:
1.Formation of intrapreneurial teams and task forces;
2.Recruitment of new staff with new ideas;
3.Application of strategic plans that focus on achieving innovation; and
4.Establishment of internal research and development programs are likely to see tangible results.
Other keys to instilling an intrepreneurial environment in business organizations include the following:
Support from Ownership and top Management –This support should not simply consist of passive approval of innovative ways of thinking. Ideally, it should also take the form of active support, such as can be seen in mentoring relationships. Indeed, the small business owner's own entrepreneurial experiences can be valuable to his firm's intrapreneurial employees if he makes himself available to them.
Recognition that the style of Intrapreneurialism that is encouraged needs to be Compatible with Business Operations and the Organization's Overall Culture: Make sure that communication systems within the company are strong so that intrapreneurs who have new ideas for products or processes can be heard.
Intelligent Allocation of Resources to Pursue Intrapreneurial Ideas
Reward intrapreneurs – All in all, intrapreneurs tend to be creative, dedicated, and talented in a variety of areas. They are thus of significant value even to companies that do not feature particularly innovative environments. Their importance is heightened, then, to firms that do rely on intrapreneurial initiatives for growth. Since they are such important resources, they should be rewarded accordingly (both in financial and emotional terms).
Allow intrapreneurs to follow through – Intrapreneurs who think of a new approach or process deserve to be allowed to maintain their involvement on the project, rather than have it be handed off to some other person or task force.
The Intrapreneur
The intrapreneurial employees, they are advised to be courageous, moderate risk takers, frugal, flexible, and creative about their pathway. Their task is to put together a team of enthusiastic volunteers, build a network of sponsors, and ask for advice before asking for resources.
Intrapreneurship Provides 10 Commandments for Employees to Become Intrapreneurs
i)Do any job needed to make your project work regardless of your job description.
ii)Share credit wisely.
iii)Remember, it is easier to ask for forgiveness than permission.
iv)Come to work each day willing to be fired.
v)Ask for advice before asking for resources.
vi)Follow your intuition about people; build a team of the best.
vii)Build a quiet coalition for your idea; early publicity triggers the corporate immune system.
viii)Never bet on a race unless you are running in it.
ix)Be true to your goals, but realistic about ways to achieve them.
x)Honor your sponsors.
The Intrapreneural Organization
Intrapreneurs have been credited with increasing the speed and cost-effectiveness of technology transfer from research and development to the marketplace. While intrapreneurs are sometimes considered inventors, inventors come up with new products.
Intrapreneurs come up with new processes that get that product to market. Part of the reason they are considered similar to inventors is that they are creative and are risk-takers in the sense that they are stepping out of their traditional role within the business.
However, their risk-taking behavior is personal. In terms of the business, they actually work towards minimizing the risk through the innovative approaches they use to more efficient and effective product production and sales.
Some Methods That Have Been Used by Businesses to Foster Intrapreneurship are
•Users of internal services are allowed to make their own choice of which internal vendor they wish to use.
•Intrapreneurial employees are granted something akin to ownership rights in the internal intraprises they create.
•Companywide involvement is encouraged by insisting on truth and honesty in marketing and marketplace feedback.
•Intrapreneurial teams are treated as a profit center rather than a cost center (i.e., they are responsible for their own bottom line). One way some companies handle this is for the team to have their own internal bank account.
•Team members are allowed a variety of options in jobs, in innovation efforts, alliances, and exchanges.
•Employees are encouraged to develop through training programs.
•Internal enterprises have official standing in the organization.
•A system of contractual agreements between internal enterprises is defined and supported by the organization.
•A system for settling disputes between internal enterprises and between employees and enterprises is part of the intrapreneurship plan.
Importance of Intrapreneurship Nowadays
Organizations are finding it harder and harder to survive by merely
competing. They are, therefore, increasingly looking towards their Intrapreneurs totakethem beyond competition to create new businesses in new markets.
As competition intensifies the need for creative thinking increases. It is no longer enough to do the same thing better or longer enough to be efficient and solve problems. Nowadays business has to keep up with changes and that requires creativity.
Develop success from failures: Discouragement and failure are two of the surest stepping stones to success. No other element can do so much for a man if he is willing to study them and make capital out of them.
According to Gary Hamel, Innovation Will be the Critical Element in creating Wealth in the Future. Successful Intrapreneurship can Lead to
•Greater remuneration (pay Raises, bonuses and/or Incentives).
•Improved confidence & status within the company.
•New career inside the company.
•New career outside the company as a consultant or advisor.
Causes behind Retardation of Intrapreneurship
The Primary Factors Retarding Intrapreneurship are
•The costs of failure too high and the rewards of success are too low.
•Intrapreneurs need to be given the space in which to fail, since failure is an unavoidable aspect of the Intrapreneurial process. This is not to say that organizations should simply condone failure, but rather that organizations need to begin to measure and attribute failure to either Intrapreneur fault, or circumstances beyond the Intrapreneurs control - and punish and reward accordingly.
•Similarly, the rewards for success are usually inadequate - few organizations provide rewards for Intrapreneurs that even closely approximate the rewards available to the Entrepreneurial counterparts. Most incentivisation systems need to be upgraded accordingly. A lot of companies talk about intrapreneurship and ask people to take risks, but if those people succeed they get nothing more than a small bonus, and if they fail they get fired. You can't create wealth unless you are willing to share it
•Inertia caused by established systems that no-one is willing to change. Most Organizations are governed by implicit and explicit systems, and in many cases peopleare reluctant to change them. Intrapreneurs are met with; this is the way we’ve always done it around here.
•Hierarchy. Organizational hierarchies are what create the need to ask for permission. The deeper the hierarchy, that harder it is to get permission for anything new. Hierarchies also tend to create narrow career paths and myopic thinking, further stifling creativity and innovation. People lower down in the hierarchy have a tendency to become dis-empowered through having to ask permission, eventually developing the "victim mentality" that causes reactivity.
What then can Organizations do to Encourage Intrapreneurship?
Organizations, therefore, need to find ways to measure and reward Intrapreneurship - both in terms of its frequency, and the rigour with which it is pursued. Organizational processes and structures are required to foster Intrapreneurship, just as they are for any other aspect of the organization.
Getting Started as an Intrapreneur
The First Step in Breaking out of Your Career Shackles is making the Mental Commitment. Success Begins in the Mind. The Following Tips will help you move forward as an ‘Intrapreneur’
•Learn as much as you can about your company, how it operates, what market it serves and how it makes profit.
•Research the business sector in which your organization competes. What are the new market trends? Who are your main competitors? Where is the industry headed?
•Assess your strengths and weaknesses. Are you currently in the right position/job in respect of those qualities?
•If you could change your job structure (responsibilities, tasks, time schedule, department etc.), what would you change? How might this change benefit the company? How would these changes benefit you?
•What are your personal and career ambitions? How can you use the company as a platform for achieving those ambitions while adding value to the company?
•Write out a detailed plan for how you might add additional value to your company.
•Whom would you approach in the company to put forward your plan?
•Given the current climate within the company, when would be the best time to put your plan forward?
•Take the bold step into becoming an ‘intrapeneur’. It will take courage, discipline and commitment – but, in time, you will scale new heights within your career.
Chapter - 4
Small Business in Uganda
Various studies have depicted that Uganda is not short of craftsmen entrepreneurs that can start and manage small businesses. In fact Uganda has a very high small business ownership per capita compared to other countries in the region. However, we are seriously short of ventures as described above.
The term small business connotes a different meaning depending on the environment and circumstances under which it is sought. However, we are seriously short of visionary and opportunistic entrepreneurs that can start and grow entrepreneurs under which it is sought. However, small businesses can be clearly distinguished from medium and large businesses by considering one or combination of factors such as:
•A small number of employees
•A small sale volume or turnover
•A small size of assets in comparison with the largest competitors in its industry.
•A small market share i.e. the area of operation is primarily local, although the market is not necessarily local.
•A small degree of formalization
•A large owner’s equity as capital is supplied and ownership is held by an individual or a few individuals.
Note: The impact of these factors is a subject and qualitative judgment depending on the industry in which the firm operates state of growth of the economy, the people involved and the purpose for which the definition is sought.
The 1998 policy paper defines small business in Uganda as employing less than 50 people and an annual turnover of less than $300,000. However, small business is some kind of business that has been done before i.e. something that has been done before by another business owner somewhere else.
Small Business Start-Up in Uganda
There is no satisfactory, universal and quantitative definition of a small business as of now. However, some researchers have tried to define it as follows:
According to the Bolton Report (1971), a Small Business
•Is a business with small market share?
•It is administered by its owners in a personalized manner.
•It does not take any instructions from outsiders.
The American Committee for Economic Development (1972) defines a Small Business as
•A business with small market share.
•Capital is supplied by individual owners.
•Workers and owners are in one community.
According to Bannock (1985) and Foley & Green (1989) small businesses act as “motivation.” Most big businesses benefit by absorbing ideas and products developed by small businesses. In case of business failure, small business loses less than a large one.
Finally, one needs fewer resources to start a small business than those required for big businesses. Small businesses create employment at grass roots and contribute a lot to the country economy.
Importance of Small Business Sector
i)The small business provides a productive outlet for the energies of the large enterprises and independent people who great pace by economic independence.
ii)Small businesses provide the means of entry into the business sector. This can be for existing, new, or entrepreneurial talents which will grow to challenge large businesses.
iii)A small business is the traditional breeding ground for new industries. It is the major source of innovation.
iv)Small businesses provide competition to large and well established businesses.
v)Small businesses provide some check on monopoly profits and on the inefficiency which monopoly breeds.
vi)Many small businesses act as specialist suppliers of parts and components to large businesses.
vii)Small businesses add to the variety of products and services. This is because they exceed in a limited or specialized area which large businesses can hardly achieve.
viii)Because of their small nature, small businesses are normally an important source of innovation.
ix)Small businesses are traditional breeding ground for large industries.
Entering into Entrepreneurship as a Necessity or as an Opportunity
Most people will be driven into entrepreneurship either as a necessary or as an opportunity. Those who start due to necessity will be driven by “push” factors, such as retrenchment, unfavorable conditions at the present employment, redundancy, government policies, etc. they enter into entrepreneurship as their last resort because they do not have any other alternative. This is every common with “corporate cast offs and drop out.”
On the other hand, there might be an opportunity that has yet been identified and exploited. A fore sighted entrepreneur would take such an advantage to exploit such an opportunity. Such a person would be encouraged by “pull” factors to join entrepreneurship as an opportunity. Some of the “pull factors are need for achievement, need for independence, desire to start something new, need for autonomy, etc. (Dawhurst & Burns, 1993).
Development Taxonomy
According to Halliday, (1987), Taxonomy is the classification of the means by which the formation of an event or species takes place. In the case of business development taxonomy, the events from which information can be classified for a business to take place make the following.
•Industrial base.
•Labor markets.
•Premises selection.
•Business support structure.
•Photocopying or duplicating culture.
•Availability of raw materials.
•Water and power supplies.
•Transport for workers, raw materials and finished products.
•Political climate.
•Government policies.
•Competitive advantage.
•Religion beliefs.
Proposal Evaluation
New business proposals are difficult to judge and evaluate. Many businesses fail in their early stages (Mason, 1989). There are certain key factors to be address during the process of the business startups. Some of them are:
i)The Mair Model
This is a Mnemonic Standing for
M -Motivation and commitment
A -Abilities and ideas
I -Idea in relation to the market needs
R- Resources
When the above factors are present, any business will succeed if it has a business plan.
The Start Up Model
Motivation is very varied. The need for independence may be as important as any need for money. Family background and support can be crucial. Sometimes there are “push” factors such as redundancy or frustration in the existing career. There might also be “pull: factors (need for independence or the invention of a new idea. Starting a business is a difficult process and the necessary drive and commitment are a prerequisite.
Abilities, skills and experience also vary considerably. They need to be related to the idea. There are probably three areas of skills which are: craft or technical skills; managerial skills and interpersonal or behavior skills. Very often an individual will not have all three in particular, technical ability may not be matched by management skills most especially those relating to the market.
The key any start-up is to relate the business idea to the need in the market. Often people into business because the can make or supply something. Only if there is a clear customer need, backed by effective demand, at an appropriate scale, can there be a viable business.
Secondly, it is crucial to understand the nature of the need being met: The single most important question for a start-up is “exactly what business are you in? This will indicate if they really understand the market needs.
Resources include physical items, such as premises, plant and furniture. They also include human resources such as employees of different levels. Resources also include finance which often perceived as the main need although; this may not in fact be a key problem.
The Plan
Having the success in the ingredients is not in itself sufficient. A business plan must have a coherent plan which links all the elements together and which charts its future progress s that it can be monitored.
1)Swot Analysis
This is an individual assessment of someone before starting any business.
Both strength and weaknesses are internal factors. They can, therefore, be tamed, controlled or adjusted. Opportunities and threats are external factors and are beyond one’s control. However, one should be able to take safeguards against them.
2)Business Start-Up Options
There are Several Types of Businesses that one Could Easily Start up. The Common ones are
•Starting from scratch.
•Purchasing an existing business.
•Purchasing a failed business.
•Purchase of franchise.
•Establishing an agency.
•Setting up a workers’ cooperative.
The Role and Importance of Small Business in Uganda Economy
Encourage Innovation and Flexibility: Smaller enterprises are sources of new ideas, materials, processes and services that large firms may be unable to provide. Small businesses usually devote themselves to developing and marketing innovative products and services. This has forced small firms to be flexible to readily face the changing market conditions and adapt quickly to changing demands within their field and capacity.
Maintenance of close Relationships with Customer and the community: Small and local businesses usually have a more intimate knowledge of their communities and thus take close interest in them. They are able to understand their customers properly: they are in close touch with the customers, suppliers and communities/stakeholders.
Keep large firm Competitive: Through introduction of new products and services. Small business help checks the development of monopolies. They encourage competition in large organizations through innovations and creativities.
Job Creation: As small businesses are created and grow, they will require staff to produce, sell and deliver their products or services thus creating jobs, they use less advanced technology that uses more labor per unit of capital.
Human Resource Development: Small businesses facilitate the mobilization of the human resource, which could not have been absorbed in agriculture or large scale enterprises, for productive activities. They employ people with little or no skills and help to develop them into a pool of skilled or semi-skilled workers that contribute to economic development.
Poverty Alleviation and Improved Quality of Life: Small businesses are an important source of income for the lowest income household, providing unsophisticated jobs and affordable entry point into business. This helps to fight poverty. Moreover in their drive provide better, cheaper and faster products and services in wider geographical areas, they thus provide relevant products and services to population in all corners of the nation, giving greater choice and a better quality of life.
Resource Mobilization: With a poor savings culture in Uganda, small businesses are an important a venue for mobilizing and utilizing investment capital that could not have been mobilized by formal financial institutions. This is because the source of funds is normal self, close friends and relatives.
Entrepreneurial Development: They provide a productive outlet for energies and talents of enterprising individuals, providing an affordable entry point into business. This allows entrepreneurs not only to exploit and test their entrepreneurial skills but also develop them as they put them into practice.
Strengthen Economic Linkage: This is because small businesses operate in socially, economically and geographically diverse sectors of the economy, helping to create and strengthen forward and backward linkage that result in improve efficiency. Large firms depend on small businesses to distribute their products and supply raw materials used in the manufacture of these products. Small businesses cannot venture. They engage in a very wide variety of activities reaching and servicing more people in the process.
International Competitiveness: With the reduction in trade barrier and restrictions in the cross-border movements, small businesses provide the opportunity for a diversified and more effective access to the international markets. They are flexible and can respond early to change in the international environment.
Economic Growth: Small businesses stimulate the creation of new wealth by investing in a small but steady and predictable manner. Their incomes are taxed to generate government revenue and products and services contribute to GDP growth.
Problems Facing the Small Business Sector in Uganda
The Following are Problems Facing Small Business Sector in Uganda
•Inadequate financing.
•Inadequate management.
•Burdensome government regulations and paper work.
•Lack of technical training and advisory services on small business management.
•Inadequate information on business opportunities, available services, new technologies, taxes/subsidies rules and regulations.
•Poor physical infrastructure.
•Limited research and development among others.
Small Business and Entrepreneurial Venture
Small business by definition includes entrepreneurial ventures because most new ventures start small. However, small businesses are distinguished from entrepreneurial ventures by the nature of the firm and aspirations/goals of the owners.
Distinctions can be drawn from the Following
Potential for Growth: Entrepreneurial venture has a strong vision for growth and strong potential for growth. This potential for growth results from the fact that it is characterized by innovative strategic practices/products which may lead to creation of new markets and industry while for small businesses growth is always small business because a small business operate within a given market.
Strategic Objectives The entrepreneur sets up very specific strategic objectives drafted to achieve the high potential for growth that includes commitment to constructive changes and achievement of unusual results arising from applications of new but many times risky innovations. The principal objectives are profitability and growth while small business objective are not as clear as demanding. Such objectives are mainly personal rather than making profits. Many of them set up objectives but may lack information due to lack of research.
The Level of risk Involved: The level of risk involved in an entrepreneurial venture is high compared to small businesses. This is because they are in most cases involved in many risk innovations.
Note: Many small businesses may/will posses some of the characteristic of entrepreneurial venture at certain stages of their development especially when starting. However, if they do not pursue growth through constructive change and innovation they are not considered to be entrepreneurial.
Chapter - 5
Creativity and Innovation
Robert Hirsch, defined creativity as the process of creating something different by devoting the necessary time and effort. This is accompanied by financial, psychological and social risks
Proctor (1995) considers creativity to the phenomenon of a working new thoughts rearing old learning and examining assumption to formulate new theories or create awareness.
Creativity is therefore the generation of ideas that results in improved efficiency and effectiveness of a system. although there are varying definitions of creativity there is creative thinking which is the inner feeling and can be improved upon.
Creativity is the powerful competitive weapon in the knowledge of business.
It’s an important source of competitive strength for all the organization concerned with growth and change.
Kerka (1999) organizes that creativity is a complex of that traits skills and capacities including the ability to work automatically thinking openness to experience and tolerate for ambiguity
The Process of Creativity
Creativity is a process which is influenced by many external factors such as the business environment, social forces and individual attributes. One of the earliest models of the creative process is attributed to Graham Walles. In 1926 Graham identified four stages of the creative process as preparation, incubation, insight and evaluation.
The Stages are Frustrated Below
This refers to the base of experience and knowledge that precedes the creative ideals. such preparation is typically a conscious effort base on one’s Interest and curiosity abort a given area of knowledge or activity.it includes perception of idea and development of interest. During this phase one becomes immersed and develops sensitivity to the issues and problems in a field of interest
This refers to that part of the opportunity recognitions process in which an individual is contemplating an idea or a specific problem. it’s the part of the process that occurs when a person is thinking about a problem as considering an idea. Discussions of the incubation phase often make reference to a specific problem that someone is trying to solve.
This is also called the illumination stage. Whereas incubation refers to an ongoing process; insight refers to a moment of recognition. It’s the point at which the whole answer or core solution springs into awareness suddenly and spontaneously. The experience, however is not necessarily one that pushes the process forward, but instead may feed back to the incubation and preparation stages for further consideration.it should be noted that creativity is not a linear process.one may move back and forth though the various stage of consciousness as the process continues.
Not all ideas are good business opportunity and what seems to be a good entrepreneurial idea may not be a real or legal business opportunity. Thus evaluation is the phase in the creativity process when insights are analyzed for them viability. This stage is also referred to as the verification or confirmation stage since it involves deeper analysis into whether a concept is workable, whether the creator has the skills necessary to accomplish it, and whether it’s truly profitable enough to undertake.
In this phase of the process ideas are put to test via various forms of investigation such as preliminary market testing, financial viability analysis and or feedback from business associates and others in one’s social network. The results of this analysis feed back to the incubation and preparation phase for more consideration.
It is this aspect of creativity that may be the most challenging because it requires the creative person to be truly honest about the prospects of his new insight. This is the phase that tests on entrepreneur’s commitment and willingness to commit to a business start. At the same time neglecting the analysis may also lead to failure.
Other Creativity Models
A number of models have been developed after the pioneer contribution made by Graham Walles. Hills (1996), reports that the notion of elaboration was added to Graham’s model to high light the importance of educing a creative idea. Elaboration is the stage in which the creative insight is actualized that is put into a formal form that is ready for final presentation several authors have argued that elaboration is generally the most difficult and time concerning part of the creativity process.
In the case of the entrepreneurial business opportunity elaboration represents the process of business planning. Assuring that a business idea has survived the evaluation stage and is still regarded as viable, this is the stage when many details are worked out. In that process, as small problems become apparent, the details of elaboration will also feed back to earlier stages of the creative process of elaboration is where the skilled entrepreneur engages in planning activities to reduce uncertainty.
Implementation is largely noted to be outside the creative thinking process but it’s hot enough just to have creative thoughts, ideas has no value until we put in the work to implement them. Very new idea that is put in practice changes the world we live in.
Innovation is a process of developing an idea into a new product or service that adds value, creates market and increases customer satisfaction.it is a means by which is an entrepreneur create new wealth. Innovation creates a resource. It finally rests up on recognizing an opportunity that exploits a market innovation applies to all levels of technology and therefore does not have to be technician (Timmons 1994).
Innovation is any practice perceived to be new by the relevant unit in production.
Innovation is a temporary sequence of activities that occur in developing and implementing new ideas.
Innovation is a complex activity which proceeds from conceptualization of a new idea to generation of a new solution and actual radiation of economic or social values.
Drucker (1985), defined innovation as: ‘the act that endows resources with a new capacity to create wealth’. It also refers to purposeful and organized search for changes and exploiting opportunities arising from such changes for either economic or social change. Drucker argues that innovation should be a systematic, organized and purposeful activity and that innovation as well as entrepreneurship is discipline with simple rules.
As quoted by Drucker, Say defined innovation as changing the yield of resources of changing the value of satisfaction obtained from resources by the consumer.
Balunya (1997), defined innovation as the act o introducing something new in this case can be anything ranging from products, organization structures, etc.
Kao (1989) argued that for something to qualify as an innovation it must be new, useful and able to solve an existing problem and be understandable.
Why Innovation?
Innovation is vital because the word is dynamic. A lot of things keep changing both within and outside an organization some change are natural and spontaneous. These changes could be demographics, perception, industry and market structures including competition because of the environment dynamism with in which people and organization operate its necessary for the latter to be innovative to cope up with the changes and to ensure survival in business.
Secondly because entrepreneurs aim at being at the top and reap profit of their work, they have to keep advancing in ways of low things are done and create something new or different that adds value. An entrepreneur aims at being on top in business to out compete others, to achieve this he has to be innovative.
The Innovation Process
Timmons (1999) suggested the following steps in the innovation process: Identifying an idea, developing the idea into a thorough opportunity, evaluation and finally implementation. Timmons argues that the innovation process has a number of problems that must be overcome if the innovation process is to be successful. There is need to determine careful and thorough evaluation whether an idea is an opportunity or not.
According to Balunywa (1997) the process of innovation begins with the perception of a new idea and ends when the idea has been effectively implemented and becomes part of organization operational activities. The process involves exploiting and managing changing values. Even though above definitions limit innovation to a process. It may be noted that innovation can also be an event.
The process of innovation, according to Balunywa begins with perception of a new idea, conceptualizing the idea by thinking about it and refining it. The next stage is the development stage where for big organization experience are undertaken and finally the implementation stage where the innovation is operationalized. The stages of innovation are illustrated below:
Innovation Process
At the first stage the entrepreneur perceives on idea, on opportunity or need for innovation. At this stage the idea is a mere feeling. The entrepreneur thinks about the idea and may necessitate going through the creativity process.
Usually at the perception stage the idea is still vague. Therefore it’s of the conceptualization stage when the idea is refined, thought about and made more explicit. This is a stage for providing answers to such question like how will the product or service be produced? Who are the users? How is the organization to be structured?
3)Development Stage
This is the stage when full conditions for the innovation are how defined and experiments undertaken to see if the product or service or product will work.
At time the idea may be taken back to the drawing board to allow gathering of more information. At this stage a strategy to implement the innovation is evolved if it works.
4)Operation stage
This is the implementation stage decision are taken on investment, the production team marketing mix decision and the structure to implement the innovation. For small entrepreneurs, the development stage is combined with the operation stage.
Types of Innovation
Timmons (1994) Summarizes Innovations into Three broad Categories
i)Incremental Innovation
This is the most common and features the introduction of a product involving some level of newness and some value creation an example is the introduction of Mobile telephone facilities
ii)Substantial Innovation
This is where there is a significant degree of product newness and important value creation for the customer for example introduction of carried soft drinks, carried beer changing of the packaging design of castle breweries products.
iii)Transformational Innovation
This is the least common and involves radical new products that create substantial value creation from the customer, for instance World Wide Web (www)
Moving from incremental to trains formational types of innovation, the degree of product newness and value delivered to customer’s increases and so does the potential to earn high profits. Concurrently, the degree of business risk can also rise as one move up the innovation ladder.
Factors Leading to Innovations in Organizations
1)Customers are more Sophisticated and Expect More
Customers today tend to be more segmented demeaning. They are looking for products that are better designed to meet their individual needs customers expect high quality and better price products for instance a TV set cars. In respects the customer is the driving force to innovation.
2)Customers have more choice
As the number of suppliers to the end market is generally rising customer loyalty to particular suppliers is disappearing education are the beauty product. There are several company loyalty to brand win be guided be the satisfaction derived from consuming a particular product.
3)Ideas Make up More of the Value Chain
In today’s production process, physical inputs are being Asigly substituted by intellectual input. Wealth creation is increasingly about capturing and applying new ideas to create new products that exploit identified opportunities.
4)Shorter Product Life Cycles
Before the test two decades, most motor vehicle manufacturing companies were developing vehicles with an estimated life span of more than 10years.Today, this has drastically reduced. With tastes and technology rapidly changing and good ideas being quickly and superseded, there is continual pressure to devise new and better products at a faster rate, for instance the use of fiber car body instead of steal.
5)Target Market Strategy
Most firms and organization in the current business word have focused targeted markets for their products. To be able to enter, survive and win the market, often new or better product package is required to win against entrenched competition.
Innovation in Business Enterprizes
1)Openness to New Ideas from all Possible Sources
Demanding customers in the most demanding markets can be an excellent source of ideas for innovative products for instance in the banking industry in Kenya, Barclays Bank continuously send questionnaires to their clients about their new of the services provided by the bank (suggestion box).
2)Constantly Engage with Customers and Markets
Working and interacting continuously with customers, understanding and interpreting their needs, living with the customers rather than studying them from a distance will increase the potential to innovate.
3)Use Vigorous idea Screening Process
A good idea is not necessarily a viable opportunity. Before spending time and resources in developing a product or service, carefully evaluate the idea and see if it’s viable opportunity. The idea should fit the competencies of the business /entrepreneur and should keep the firm a dire future objective.
4)Continuous Seeking of Information
The innovation process requires information about markets and their sizes, customer profile, distribution channels, costs regulatory compliance the size and strength of competitors among others. Government universities and research agencies can be very rich sources of timely information to keep enterprises screen ideas and plan for the development and blanch of the products.
5)Minimize and Manage Risk
Risk is the likelihood that the actual outcome will deviate from the expected outcome. The degree of risk is a measure of the less than perfect state of information that is available regarding the forces in favor and the forces against the project. Acquiring all the relevant information that is feasible minimizes risk.
6)Gather Skilled People to Build a Competent Team
Successful innovation requires teams of skilled and dedicated people. Entrepreneurs need to recruit the best and bright people for their team. There is need for strong consideration on how to reward the team members.
7)Provide a Strong Sense of Direction
Leaders in innovative enterprises know their firms and what they want to be.
They have a strong outward focus, are confident and interested in ideas and change. From their thorough understanding of their opportunities, the product they are developing and the market are seeking to capture, they inspire and build confidence in their team.
Sources of Innnovation In Business Enterprises
1)The Unexpected Occurrence
This is a system of fundamental change in behavior, expectation of a great number of customers, which requires relegation understanding analysis, support and exploitation to the value and yield. It’s the diversion from the normal business trend happening in an organization. It/s the urge for change from the ordinary way of doing things.
In many organizations, the management fails to exploit such opportunities because they believe that anything which has lasted for a fair amount of time must be normal and go on forever. Anything that contradicts it is considered unhealthy. Unexpected success is challenge to management‘s judgments.
Unexpected success is not just an opportunity or innovation but demands innovation. It forces organization to ask: what basic challenges are how opportunities for the organization.
2)Unexpected Failure
Failures like success cannot be rejected and rarely go unnoticed. Many failures arise out of mistakes, negligence, greed, stupidity thoughtless band wagon –climbing or incompetence whether in design or expectation. It may arise out of assumptions on which a product or service, its design or its marketing strategy were based or may no longer fit reality. For instance, changes in perception or value to a particular product to customers, changes in income in which customers demand something quite different. Any change like this is an opportunity for innovation.
Unexpected failure demands that the organization go out, look around and listen. It calls for more study and more analysis most importantly it should be considered as a symptom of innovative opportunity and be taken seriously.
3)Unexpected Outside Event
These are events that come from outside the organization or enterprise and significantly affect the operation of the organization. Unexpected outside e3vent, may be above all an opportunity to apply already existing expertise to a new application that does not change the nature of the “business” the organization is in. It may be an extension rather than diversification.
An incongruity is a discrepancy or disagreement between what is and what ought to be or between what is and what everybody assumes it to be. It’s a symptom of an opportunity to innovate (Drucker 1985).
An incongruity is a symptom of change either changes that has already occurred or changes that can be made to happen. These are changes within an organization, a market or a process. It’s this visible to people with in or chose to the organization, market or process. There are four types of incongruity that occurs in business organization or industry.
i)Incongruous Economic Realities
Economically, if the demand for a product or service from a particular organization is growing steadily its economic performance should improve thus increasing profitability. A lack of profitability and good results in such an industry brings about incongruity between economic rarities.
ii)Incongruity between Reality of an Industry and the Assumption About it
Situations may occur in an industry or service where people misconceive reality. They will concentrate their efforts on the area where results do exist. This is incongruity between reality and behavior. This incongruity offers opportunity for successful innovation to whoever can perceive and exploit it.
iii)Incongruity between Perceived and Actual Customer Values and Expectations
Producers and suppliers at times misconceive what it is the customer actually buys. They assume that what represents” value” 6to the producer is the same to the consumer. Variations in expectations and values occur. The reaction of the typical producer and supplier is then to complain that customers are irrational or unwilling to pay for quality. Whenever such a complaint isheard, there is reason to assume that the values and expectations the producers holds to be real are incongruous with the actual values and expectations of customers and clients. Then there is reason to for an opportunity for innovation that is highly specific, and carries a good chance for success.
iv)Incongruity within the Rhythm or Logic or Process
This is an internal incongruity with in a process rhythm or logic that upset the customer. Customers are aware of it. It occurs where customers feel uncomfortable with the product or service so that the product or service can be redesigned to remove the discomfort. He users or customers talks about it,but what lacks however is somebody willing to listen somebody to take seriously the customers concerns, so that the product orservice can satisfy the customers.
2.Process Need
This is an innovation that perfects an already existing process, replacement of weak links, redesigning old existing process around newly available knowledge. The missing link forms the process need for innovation with in an industry, business or service sometimes everybody within the organization, an industry always knows that the need exists. Yet usually no one does anything about it. However when the innovation appears immediately accepted as “obvious” and soon becomes standard.
An example of the process need innovation is the mobile phone services in Uganda. The telephone service in Uganda was introduced long time ago, but the mobile services were not available. To perfect the communication system there was a Need in the telephone industry that could allow communication to take place anywhere. Celtel, MTN, Warid Mango saw this as an n innovative opportunity and introduced mobile phones in Uganda.
3.Industry and Market Structure
This is a form of innovation that occurs from changes in the market structures within the economy. In reality market and market structures can remain stable for many years and can ensure that the market leaders and their trailers establish sound foundation in the market. However a slight disturbance of these structures can cause the collapse or disintegration of the market or industry. Such a disturbance can be a source of innovative opportunity within the industry or 9organisation.An example of innovation from changes in industry and market structure is the Auto mobile industry. On a local scene after the re-introduction of the EAS, in the newspaper industry the East African newspaper has been trying to cover and report news in E. Africa. Many bus companies like Gateway, Akamba, etc. have come in to exploit the opportunity in the transport industry with in the region.
4.Demographic Factors
These are innovative opportunities that occur within the organization or industry as a result of changes in demographic factors. These may be changes in population, its size, age structure, composition, employment, education, and income. Demographic factors are the most reliable. This is because demographic changes are known. For instance the number of students in Uganda expected to join p.1 by the year 2009 are already born or those to join s.1 by the same year can be estimated. As a result those who analyze demographic changes can exploit them and reap great rewards.
An example is the education sector in many developing countries including Kenya, Uganda and Tanzania. Due to the increasing population as per the projections, there is an increasing number of private institutions for learning as the demand for education facilities outstrips the supply in public institutions. As a result the education sector has been vibrant and innovative individuals and organization are exploiting the opportunity. The demand for accommodation has led to the construction of private hostels around the college. These are innovations as a result of demographic changes.
5.Changes in Perception
Perception refers to attitude towards a situation or the way organization individuals perceive or look at a situation. Changes in perception does not change facts but changes the learning hence different consequences.
Drucker (1985) demonstrates this concept using two phases, the glass is” half full”
And the glass is “half empty”. The two phases are mathematically the same but interpreted differently due to perception. The interpretation will depend on the mood rather than facts. Innovative opportunities occurs if the general perception changes from seeing the glass as half full to seeing it as half empty.
An example is the cinema industry. With the increasing number of video tapes in the market there has been a sharp decline in people attending cinema shows in cinema halls. These have been an increase in video show rooms. There has also been an expansion of TV, video deck, DVD market. This is innovation as a result of change in perception and tastes.
6.New Knowledge
This is innovation within an organization as a result of new knowledge in production or service provision. According to Drucker knowledge-based innovation is the “super star” of entrepreneurship. It gets publicity and lowly. It’s what people mean when they talk of innovation.
7.The Bright Idea
Innovations based on a bright idea probably out number all other categories taken together. A very large population of the new businesses that are described in the books of entrepreneurs and entrepreneurship are built around” bright ideas”, e.g. the ball point pen, beer cars etc. Also, what is called research in many businesses aims at finding and exploiting bright ideas? Yet bright ideas are the most risky and least successful source of innovative opportunities. The casualty rate is high.
Also no one knows which ideas for an innovation based on a bright idea have a chance to succeed and which ones are likely to fail. Why did the zip find acceptable and practically displace buttons, even though it tends to jam? (After all a jammed zip or a dress, jacket, or appear of trousers can be quite embarrassing.
Principles of Innovation
These are o number of “Dos” – Things that have to be done. There are also a few “don’ts” –Things that should not be done and these are conditions.
a)The Do’s
Purposeful, systematic innovation begins with the analysis of the opportunities. It begins with thinking about the sources of innovative opportunities. In different areas, different sources will have different importance at different times.
Innovation is both conceptual and perceptual. The most important issue about innovation is therefore to go out, to ask and to listen. Successful innovators use both the right side and the left side of their brains. They work out analytically what the innovation has to be to satisfy an opportunity. Then they go out and look at the customers, the users, to see what their expectations, their values, their needs are. One can perceive that this or that approach will not fit in with the expectations or the habits of the people who have to use it.
An innovation to be effective has to be simple and it has to be focused. It should do only one thing, otherwise, it confuses. If it’s not simple it doesn’t work. Everything new runs into trouble, if complicated it cannot be repaired or fixed. Indeed a greatest praise on innovation can relieve is for people to say: This is obvious. Why didn’t I think of it? Innovation should be focused on a specific need that it satisfies on a specific end result that it produces.
Effective innovation starts small. They try to doone specific thing. Innovations should better be capable of being started small, requiring at first little money, few people and only a small and limited market. Otherwise there is not enough time o make the adjustments and changes that era almost always needed for an innovation to succeed.
A successful innovation aims at leadership. It does not aim necessarily at bellowing eventually a “big business, in fact no one can foretell whether a given innovation will end up as a big business or a modest achievement.
b)The Don’ts
Try not to be clever. Innovations have to be handled by ordinary human beings, if they to attain any size and importance at all, anything too clever, whether in design or expectation is almost bound to fail?
Don’t diversify, don’t splitter, don’t try to do too many things at once. Innovations that stray from a core are likely to fail. They remain ideas and do not become innovations. An innovation needs the concentrated energy of a unified effort behind it.
Do not innovate for the future, innovate for the present. An innovation may have long –range impact, it may not its full maturity until 20 years later they invention of computer and its uses.
Innovation is work. It requires knowledge. There are clearly people who are more talented than others. Also innovators rarely work in more than one area.
To succeed, innovators must build on their strengths. Successful innovators look at opportunities overt a wide range. But then they ask which of these opportunities fits me, fits this company, packets to work what we (or 1) are good at and have shown capacity for in performance?
Innovation is an effect in the economy and society, a change in the behavior of customers, farmer’s etc. It’s also a change in a process that is how people work and produce something. Innovation therefore always has to be close to the market, focused on the market, indeed market driven.
Chapter - 6
Environmental Analysis
Many different forces inside and outside an organization influence a manager’s performance. So he management functions of planning, organizing and controlling often are must be accomplished under constantly changing conditions. A manager must deal with the environments.
The organization‘s internal environment, which usually can be controlled and the often unpredictable and uncontrollable conditions of the outside world, the extend environment.
The Organization
Organizations vary in purpose and in technical needs e.g. schools, hospital, bank, telephone companies, civil groups and restaurants are all with differing goals and needs. But they and any other organization have other extent in common.
The basic theory can help managers simplify and deal with the complex interactions of internal and external environments. An organization can be viewed as simply one element in a numbers of elements that depend on each other. The organization takes Resource (I/P) from the larger system (the external environment). Processes these resourceswithin its internal environment and reforms them to the outsidein changed form (o/p). The figure
Below Displays the Fundamental Elements of the Organization as a System
The Organisation Environment as a System
Every organization interacts with a larger system by taking resource and providing o/p.
11p, human and non-human Resource. Human l1p comes from the people who work in the firm. they contribute their time and energy to the organization in exchange for wages and other tangibles and in tangibles rewards, non-human Resource consist of raw materials and information. These are transformed or used in contribution with human resource to provide other resources.
A steel mill employs people and blasts furnaces, plus other tools and machines, to transform ironore into steel, rubber, plastic, fabrics and in combination with people, tools, and equipment makes auto mobiles.
A university uses resources to teach students, do research, and to provide information to society though the education process. The l/p are student, faculty and money, A hospital‘s l/p are staff, supplies and patients. The patients are processed through the application of medical knowledge and treatment. The o/p is patients restored to a level of health consistent with the severity of the disease.
It’s the manager who must coordinate the activities of the entries system (organization) or one of the many sub systems (department) within the organization. For the manager, the systems concept emphasizes that;
i)The ultimate survival of the organization depends upon its ability to adopt to the demands of the environment, and
ii)In heating these demands, the total i/p process o/p cycle must be the focus of managerial attention.
The Internal Environment
The environment inside the organization in which a manager must function is called the internal environment. It includes discussions of the settings where managers work, the day to day activities that utilize much of their time and some generalized skills necessary to cope with the internal environment. It includes the following;
Three Management Levels
Most organization functions have at least three distinct but overlapping levels, each requiring a different managerial focus and reemphasis. They include:
i)The operations level.
ii)The managerial level, end
iii)The strategic level.
These can be Illustrated Below
1)The Operations Level
Every organization whether it prod less a physical plot as a service, has an operations function, in any organization therefore there is the operations level that focuses on performing effectively, whatever (it is that) the organization produces or does in the case of a physical product; there is the flow of material and the supervision of the operations. Colleges must be sure the students are properly processed, registered, scheduled, and taught and their materials are maintained. Banks must see that the cheques are processed and financial transactions recorded accurately and quickly.
As the figure above shows an operations function is at the core of every organization. The managerial task here is to develop the best allocation of resources that will produce the desired o/p.
2)The Managerial Level
As an organization increases in size, someone must coordinate the activities at the operations level as well as deciding which products or services to produce. These problems are the focus of the managerial level. A dissatisfied student complains to the Dean of College. A sales manager mediates disagreement between customers and sales people. At this level, the managerial task is really too fold;
i)Managing the operations function
ii)Selling as a link between those who produce the product or service and those who use the o/p.
In other words, for the operations level to do its work, a manager must make sure it has the correct materials and also must see that the o/p gets sold as used.
Managers and the Level of Management
The primarily focus of manager’s activities depend on their level in the organization.
3)The Strategic Level
Every organization operates in a broad social environment. As a part of the environment, an organization also is responsible to the environment. The strategic level must make sure the managerial level operates within the bounds of society. Since the ultimate source of authority in any organization must provide goods and services to society in away approved by society. Thus the strategic level determines the long range objectives and direction for the organization that is how the organization will interacts with its environment. The organization also may seek to influence its environment though lobbying efforts, advertising effort or education. Programs aimed at members of society.
Types of Managers and Levels of Management
Understanding the three levels of management can be helpful in determining the primarily focus of manager’s activities at different levels in an organization. For example asset of terms widely used in organization includes top management, middle management and first level management.
In this case the top management corresponds to the strategic level, middle management. Corresponds to the managerial level, and first level management corresponds to the operating level.
NB: Refer to diagram behind.
While the terms top, middle, and first level management may not always correspond exactly to the three levels outlined above, they provide an understanding of managers do at each level. The term manager covers all three levels, from the chief, executive officer to the first level supervisor. All are managers but the focus of their activities varies.
The actual terms used to identify managers at various organization levels differ from organization to organization and business, education and government.
Generally speaking, the activities of supervisors, chairpersons and program managers are similar despite the different terms used to identify them. A chairperson of a department in college could be expected to spend most of the time dealing with the faulty as individuals. Similarly, manager’s presidents and cabinet secretaries spend much of their time being concerned about the work that their organization is doing in terms of the expectations of owners, customers and tax payers.
The Skill of Managers
Certain general skills are needed for effective managerial performance regardless of the level of the manager in the hierarchy of the organization. however, the mix of skills will differ depending on the level of the manager in the organization there are three basic skills;
i)Technical Skill: Is the ability to use the tools procedures or techniques of a specialized field. Accountants, engineers, nurses, physicians’ musicians each have specific technical skills in their fields of specialization; managers must possess sufficient technical skills to accomplish the jobs for which they are responsible.
ii)Human Skills: Is the ability to work with and understand people. Which manage people effective, managers must participate effectively with others.
iii)Conceptual Skill: Is the ability to comprehend all activities and interests of the organization. This skill involves understanding how the organization functions as a whole and how the parts depend upon or relate to one another.
While all three of these skills are essential for effective managerial performance, their relative importance to a specific manager depends on his or her level in the organization. Technical skills is critical at the lower levels of management but becomes less so as one moves up through the management tanks. A production foreman and a nursing supervisor will need more technical skills than the president of the company or hospital administrator, because they deal with day to day problems in manufacturing and nursing.
On the other hand, the importance of conceptual skills increase as one rises in the management.
The higher one is in the hierarchy, the more involved one becomes in longer term decisions that can influence many parts of the organization or the entire organization. Thus, conceptual skills are most critical for top managers.
While human skills is critical at every level in management, it probably is most important at the lowest level. The greatest number of manager subordinate interaction are likely to occur at this level.
The Role of Managers
Recently it has been determined that managers perform 10 different but closely related roles. The figure below shows that 10 roles can be separated into three different groupings; interpersonal roles, information roles and decisional roles.
The Overlapping Roles of Managers
1)Interpersonal Roles
These roles focus on interpersonal relationship. The three roles of figure heads, leader, and liaison result from formal authority. By assuming them; the manager is able to move into the informational roles that in turn lead directly to the decisional roles.
All managerial jobs require some duties that are symbolic or ceremonial in nature.
The manager’s leadership role involves directing and coordinating the activities of the subordinates. This may involve staffing (hiring, training, promoting, dismissing) and motivation.
The Liaison role gets mangers involved in interpersonal relationship outside of their area of command.
2)Information Roles
This set of roles establishes the manager as the central focus for receiving and sending non-routine information. Through the three interpersonal roles discussed above, the manager builds a network of contacts.
The monitor role involves examining the environment in order to gather information about changes, opportunities, and problems that may affect the unit the formal and informal contacts developed in the liaison role are often useful here.
3)Decisional Roles
While developing interpersonal relationships and activities are not ends in themselves as the basis relationship to the process of decision making. In fact, some people believe that these decisional allocated, and negotiators are manager’s most important duties
The purpose of the entrepreneur role is to bring about changes for the better in the unit. The effective first line supervisor is looking continually for new ideas or new methods to improve the unit’s performance, the effective college clean constantly plans change that win result in higher quality education. The effective marketing manager always tries to seek for new product ideas.
In the disturbance handles role, managers make decisions or take corrective action in response to pressure that is beyond their control because there are disturbances, he decisions usually must be made quickly, which means that this role will take priority over other roles, the immediate goals is to bring about stability, when an emergency room supervisor responds quickly to a local disaster, a plant supervisor reacts to astrike, or a first line manager responds to a breakdown in a key piece of equipment, each is dealing with disturbances in the environment. These responses must be quick and must result in a return to stability.
The resource allocate role places a manager in the position of deciding who will get what resources Including money, people, time and equipment. Therefore are level enough relationship to go around; the manager must allocate the scare Rss towards numerous possible ends. Resource allocation, therefore, is one of the most critical of the manager’s decisional roles. A first line supervisor must decide whether an overtime schedule should be established or whether part time workers should be hired. The president of the United States must decide whether to allocate more to defense and less to social programs, or Vice versa.
In the negotiator role, managers must bargain with other units and individuals to obtain advantages for their own units. The negotiations may be over work, performance, objectives, RSS, or anything influencing the unit. A sales manager may negotiate with the production department over a special order for a large customer a first line supervisor may negotiate for new type winters, a top manager may negotiate with a labor union representatives.
Management Levels and Management Roles.
A manager’s level in the organization influences which managerial roles are emphasized. Obviously, top managers spend much more time in the figure lead role than first line supervisors do.
The liaison role of top and middle managers involves individuals and groups outside the organization while the liaison role at the first line level is outside the unit but inside the organization.
Top manager monitor the environment for changes that can influence the entire organization middle managers monitor the environment for changes likely to influence the particular function that they manage (marketing). And the first line supervisor is concerned about what will influence his or her unit. However, while both the amount of time in the various roles and the each role may differ, all managers perform interpersonal informational and decisional roles.
The External Environment
No organization is self-sufficient, whether profit or nonprofit, each organization provides something to the outside environment and in from depends on the environment for survival. The numerous components of the external environment can be classified into two categories
Direct influence on the performance of the organization and Indirect action components, which influence the climate in which the organization operates and may (under some conditions) become direct – action components.
Direct Action Components of the External Environment
The major direct – action components of a managerial external environment are the organization clients that it must satisfy, it is competitors, and the organization and individuals that simply Rss the figure below illustrate the direct action component
The performance of the organization is influenced by the above factors,
A business organizations customer is clinical, and managers constantly must be aware of the present needs and emerging needs of clients. This may involve altering present products or services, developing new ones, or even entering new business.
The actions of competitors that directly impact on managers are of two basic types
a)Intra type
This occurs between institutions engaged in the same basic activity for example competition between banks for customers
This rises between different types of organization for example hospitals compete with health maintenance organization for patients.
Every organization enquires inputs from environment in the, of raw materials services, equipment, labor and funds. They use these inputs to produce output. This organization depend on those who supply resources.
The availability of resources determines the organizations capacity to respond to threats and opportunities presented to it Depending on the type of organization, some suppliers will be more critical – and others for example a hospital Leeds funds and qualified staff.
Indirect Action Component of The External Environment
These can affect Managers in at Least two Ways
a)The outside organization can have a direct influence on an organization or an indirect influence through a direct influence througha direct-action component for example a consumers groupmaylobby for certain cases like equal credit opportunities on product safely.
b)Certain indirect action components organization influences the climate in which the organization functions for example the economy may expand or decline requiring response from management.
Some of the Most Important Components of the Indirect Action Components Include
Changes in technology can influence the destiny of the organization. Technology may be a constraint when opportunities exist but the necessary equipment is not present. However technological innovation can create opportunities for entirely new industries for example the effect of ATM on banking.
Economic changes pose both opportunities and problems for managers. It has an effect on the demand for a company product as service. It also facilities the establishment of new enterprises. A major show down in the economic growth can bring failure to some organization changes include halation refers, productivity savings unemployment refers, productivity savings unemployed refers etc.
Therefore managers must constantly monitor changes in economic changes in order to minimize threats and capitalize on opportunities.
Political and Legal Factors
Nutritious laws and Authority characterize the political and legal environment faced by most managers. This indirect component may act as both a constant and opportunity for example the vocational Education Act provides opportunities for certain types of education while acting as a constraint for others.
Cultural and Social Factors
Change appears to be a constant element in our social system, all the people are part of the cultural and social order that affects their behavior, traditions, customs and beliefs influence all the people and organization managers must identify the changing cultural social conditions that win influence their organization yet many organizations have not considered the impact of such conditions or have under estimated their impact.
For many organizations this indirect action component presents great challenges it provides managers with both opportunities and threats for those managers who depend on foreign resources the international factors could be a problem. For some managers or organization win provide foreign competition.
In markets for other organization it will provide opportunities to sell their plots in new markets. When a business firm decides to leave its national broader and do business in other countries it becomes a multinational company with the decision to become a multinational company the international component takes an increasingly important and complying role. The organization becomes subject to the nature of different cultures, economic and political system
Chapter - 7
Feasibility Study
This is an in-depth investigation aimed at determining how perfectible and how desirable a specified project or process or system is. The investigation aims at analyzing all the critical elements in various aspects in the production of a given product or service.
The study eventually Results into A Project Feasibility Study Report, Which Ways among Others Provide Answers to The Following
Whether or loot the project under study can be done and if so based on pre-stated project objectives.
The most practical, beneficial and describe way to carry out the project.
Understanding of Feasibility Studies Which Include the Following
•Feasibility studies in their practice applications incorporate viability studies.
•The position that feasibility studies occupies in the overall cantered of the project cycle
•The distinction between a feasibility study and a project report.
Feasibility Vs Viability Tests
The Feasibility Study/Test Refers to A Preliminary Inventory of the Following
•The entrepreneurship ability.
•Resource requirement.
•Resource availability.
The aim of this preliminary test is to reach a decision as to whether the idea under test has promise as lot
In the day to day use of the term however, a feasibility study includes both tests of feasibility and viability. An idea is feasible if it’s within the entrepreneurships ability to transform it into an enterprise.
Its viable if the enterprise can achieve the pre – set objectives the profitable in case of a business enterprise or beneficial in the case of social or community projects.
The Project Cycle
Complete Imploration of the Project Involves Several Stages Which Include the Following
•Project identification that is the development of new ideas.
•Project preparation lie laying down the parameters and characteristics of the project
•Project appraisal that is tests of feasibility and viability.
•Post implementation evaluation.
The feasibility study proper is stage 3 in the cycle. However the feasibility study report will also include aspects of stages 1-5
Pre – And Post Investment Report
A feasibility is or pre – investment decision is made it examines a proposed project in terms of its areas.
Objectives, technical feasibility social impact, etc note that it’s different from a detailed project report or a business plan in commercial terms
There are also post investment decision activities. These are project work plans which include the following; detailed specifications and designs, engineering drawing, site investigation, process designs, and tire schedules for implementation.
The above two (post and pre) report type should also be destination from a post – project evaluation report. This as they have suggests is a post – implementation activity whose purpose is to evaluate the attainment of the project objectives pre- investment decision includes the following:
Since the feasibility study report is the basis of a major investment decision, the study light to be very broad but critical covering all the relevant ground and taking advantage of the previous experience if any in related fields.
The study should include adscription of the project objectives and principle characteristics if it’s to be used as a bench more for implementation, monitoring and evaluation of the project.
Similarly the report should include a rundown of the main assumption upon which predictions of performance are based. It also includes elements of risks and uncertainty associated with the implementation of the project.
The report, a part from giving suggested courses of a firm, it should also point out alternatives considered and make a case for the suggested choices
Quiz often it will be necessary to make a adjustments to some of the parameters in order to attain reliable solutions of it may become necessary to compromise on the type of technology to be employed, sources of inputs, the production programs in order to enlace the viability of the project.
Not all the project will pass the feasibility / viability tastes, where the tastes indicate that the project is not possible the report should stage so giving logical explanations for this position.
The emerging trend for conducting as a whole studies and project implementation as a whole is one that involves a section of stakeholders and particularly the end users
Good feasibility studies are based on more listening, piloting, demonstrating and main streaming.
Stakeholders in A Feasibility Study
Because feasibility studies solve a variety of stake holders, they include a range of conflicting interests, each interested party will always went to bias assumptions and expectations within them own ends at the forefronts of a prospective investor may prepare a document based on extremely realistic interests.
However, once the investor is satisfied that the project has got prospects of success, its expected performance, he will also be prepared to get a loan because of the supporting documents.
The Range of Potential Stakeholders win varies with the Uniqueness of each Project but they include the Following
•The investor.
•The financial.
•Supplies and contractors.
•Government (firm the social economic angle).
•Aid agencies.
Contents of a Feasibility Study
As already noted the feasibility study is a very important step in the project analysis cycle. The decision to threat depends mainly on the recommendations of the study. This calls for thoroughness in the exercise. The resulting report must contain answers to all aspects of the project to minimize as much as possible risks and uncertainty which is associated with new investment. The study must cover technical, final and marketing, management, organizational, social – economic, environmental and any other aspects that may affect the success or failure of the project.
Since feasibility studies are relevant to virtually all areas of activities, be it in manufacturing, agriculture, import and export trade, community development projects, it’s not redistrict to propose a standard format that a feasibility study report ought to follow.
The relative important of different dimensions of analysis win every with the type of project of which analyzing commercial project commercial project, financial ability will be of paramount consideration for community projects, social benefits will be more considered than profitability, if its Agriculture the emphasis and content will include such considerations like soil texture, diseases control, wealth cycles, these may not be relevant to be manufacturing project
Other Services of Variation Include
•The size of the project.
•The costs involved.
•The nature of the production process.
•The expressed requirements of the stake holders sponsoring the study.
Contents of a Feasibility Study
1.Executive Summary
•It’s written last but appears first in the report.
•It’s extremely important since many busy executives do not read the entire report.
•It also includes an outline of the principle objectives, characteristics of the project, Major assumptions, total cost of the project and expected sources of finance and the study’s major conclusions and recommendations.
2.Project Background
•History of the background.
•History of the project.
•The importance/justification of the project.
3.The Project
•Project description and detailed features of the proposed product or services.
•Brief details of cost estimates and the proposed sources of financing.
•Details of the executing firm/company and managerial expenses.
4.Market Analysis
•Demand patterns that is collect and future trends, effective demand, etc.
•Expected market share.
•Price projections.
•Other marketing variables like distribution, promotion etc.
•Competition that is their capacity, strength, and weaknesses future entry and exit.
•Competitive advantage. This is an analysis of the company / industries own strengths and weaknesses.
5.Technical Feasibility
•Location of the firm/business
•Utilities and infrastructural facilities that is their availability, adequateness and reliability.
•Machinery, furniture and equipment, brief specifications, availability in Local or export markets, schedule of supplies and costs.
•Buildings that is specifications, layout and cost motor vehicles that is specifications, cost and source.
•Raw material requirement that is the type quality and quality, availability, sow ices and cost
•Production process. This includes plant and lay out
•Production capacity and expected capacity utilization overtime.
6.Organization and Management
•Top, middle and lower cadre personnel i.e. the skill and hours of each required, their availability and cost.
•Specialist skills consultants if required i.e. the hours required and the cost.
•Organizational structure.
•Reward structure.
7.Financial Viability
•The project cost that is capital expenditure and working capital.
•Details of financing that are the cost and structure.
•Estimate of the perfect results that are production and sales schedule, perfected over a period of time.
•Calculation of profitability, liquidity and payback period.
8.Economic Viability Analysis
•Use of discounted cash flow, computation of the NPV and IRR.
•The break even analysis.
•Economic valuation of resources.
•Social economic benefits.
•Economic rate of return.
•Environmental impact analysis.
•The nature and type of disposal.
•The effect of such disposals.
9.Outstanding Issues if Any
Conclusion and recommendations including a proposed implementation schedule (when)
Uses of Feasibility Study
•Providing the information necessary to make the investment decision.
•Supporting application for financing.
•Serving as a reference document for project implementation monitoring and evaluation.
•Solving as a support document for license applications, tax exemptions etc.
The Preliminary Consideration
Before embarking on the preparation of a feasibility study, it’s necessary to put into proper perspective the project, project cycle and the feasibility study report.
The Following Are Some of The Areas That Should Be Considered
•The starting point.
•What is the starting point of the project?
•Is it new, replication, an extension or a reliabilities / reconstruction?
A New project: Starts from scratch which may be an advantage in the sense that there are no previous experiences and the investor has a free hand to be innovative. The disadvantage is that with such projects the risk and uncertainty is high.
Replicated Project: They have the advantage of previous experience and they normally follow a previous success story.
Extension Project: These also follow a success story and there are fewer areas of risk and uncertainty since they are also expending in size they will enjoy economies of scale and the viability is easy to establish.
Reliability/Reconstruction Projects: They are based on the assumption that the existing activity has failed in one way as the other: Reforms may include among others:
•Project mismanagement.
•Effects of civil disturbance or war.
•Natural catastrophes or general economic decline.
2.Sectorial Differences
Different sectors of the economy: - Agric agro – industry, manufacturing industry infrastructure, commerce, social /community projects, etc. will call for different consideration issues and emphasis and different skills and experience for an effective team.
Differences will also arise between project in the public sector, private sector, joint venture projects, projects arising from foreign investment (FDI) and projects quitted by NGO’s and CBO’s. The spectrum of question that needs answers will be different.
3.Scale of the Project
The preparation of e feasibility study is part of transaction cost. This being the case, investment in the feasibility study should be in line with the scale of the project. Just as it would be indivisible to commission a multi – disciplinary project it would be equally have to settle for a brief over view report as a basisfor making the decision to invest in a major project.
There is therefore a need to establish a match between the complexity and thoroughness of a feasibility study and complexity and level of investment expected.
Should the project prove viable economists will use the concept of margin at cost to establish this match for example.
1)Oil Seed Processing Project or a Venture Capital Company.
•Private sector projects.
•Key issues will probably be technical feasibility and financially viability.
•Ownership, investment risk and management will probably be vested in the same individual.
2)Copper/Cobalt Exaltation as Oil Pipeline Extension.
•Large investment.
•Probably public sector participation.
•Key issues will extend to economic viability, social benefits and environmental concerns.
•Rural electrification, safe drinking water, rural communication facilities.
Other Areas of Distinction
Projects that is purely domestic in characteristics Vs projects with international inputs.
Different concepts of size base on different measures – level of investment, of employees, sale, turn over etc.
While Preparing Feasibility Studies the Following Should Be Born in Mind
•The order in which work is undertaken in feasibility study preparation does not at ways strictly follow the order of the table of contents as listed in the previous section.
•Some modifications way needs to be done even after the investment decision has been taken later decision.
•In the project cycle may necessitate changes in options previously prefixed.
Ordinarily B should follow A. however having decided on the product, technology alternatives may offer an alternatives option which necessities residing the characteristics of the product or service. Similarly location, C, may have all desired qualities and may have the professed option. However with the changes created by the AB interaction the scale of operations may change hence necessitating a change in location.
Another area that may result in re – orienting previous decisions is the stage of negotiation and contracting results of negotiations especially with financiers, suppliers and contractors may affect the viability of the project, yet these must be carried out after the feasibility study has been completed.
Negotiations by their very nature involve compromises and shifting of positions making it unavoidable to alter positions previously regarded as superiors.
One possible escape route is far the feasibility study to work within ranges within which negotiations and contracts should limit themselves
The need to review of previous positions often results in impasse especially when decision makers have different professional backgrounds and/or different perspectives of the projects objectives. Some professionals are conservative and will be revenant shift from them profiled position, both financial and economic analyses are key issue in feasibility study preparation.
There is no outright answer; one must refers to the basis objectives of the project financial analysis reflects the interests of the investor that is the analysis examines the financial outcomes of the project. On the hand economic cost/benefit analysis takes the macro perspective and examines
The alternative uses of the resources to be invested (opportunity cost), and benefits from the project to the society and economy as a whole and employment, contribution to G.D.P evaluation of poverty, reduction of income, inequality of forex, economic linkages created, etc.
If the investment decision is being made by individuals then financial results will prevail and if the project is intended to benefit the society, then economic analysis will be given more weight.
Chapter - 8
Introduction to A Business Plan
Start-Up of a Business
If you are planning to start a business the most important thing to do is to know your behaviors and competences that is you can answer this question “WHO AM I?” When you know who you are then the choice of business is made easy. You only start businesses that in line with your behaviors and competences. Many people cannot explain who they are in terms of their behaviors. They are more comfortable telling you about their achievements and behaviors of their neighbors. Moreover, successful entrepreneurs know very well who they are and can describe their behaviors in concrete terms. They know their strengths and weaknesses. It is important to take advantage of the valuable/useful personal characteristics. Take advantage of the weakness by looking at them as opportunities and not threats (SWOT Analysis).
What are your Strengths?
When you are patient or have a good smile, you can do very well in a customer service-oriented business
What are your Weaknesses?
When you are rude or short tempered, and then you are better off avoiding customer service-oriented businesses. When you decide to have one then it is better to employ a person who is customer service oriented to cover up your weakness.
Generating Ideas
The environment that we live in is full of opportunities that can be translated into business ideas but many are never recognized and tapped. Business ideas are usually picked from existing problems, unmet needs or underutilized resources. It is important to scan the environment and spot the opportunities that do exist and develop ideas to match it. Businesses that are not open to new ideas usually die in their first two years of operation. The need to change with the changing business environment is supreme.
Identifying business opportunities is not enough but a person with the right characteristics to match the business opportunity is very important, that is “A good person with a second class idea is better than a good idea with a second class person.” That is the need to know your strengths and weaknesses as discussed earlier in order to know what to do.
Creativity is typically used to refer to the act of producing new ideas, approaches or actions, while innovation is the process of both generating and applying such creative ideas in some specific context.
Definitions of Creativity Are Typically Descriptive of Activity That Results in
•Producing or bringing about something partly or wholly new;
•Investing an existing object with new properties or characteristics;
•Imagining new possibilities that were not conceived of before and;
•Seeing or performing something in a manner different from what was thought possible or normal previously.
For example, Amabile et al.., (1996) suggest that while innovation "begins with creative ideas,"
"...creativity by individuals and teams is a starting point for innovation; the first is a necessary but not sufficient condition for the second”.
Creativity is a key to the development of both new and existing businesses, especially for those who want to grow towards a profitable business. Those people who are creative will be base what they come up with on their resources and experiences.
Skills, Talents and Knowledge
Skills and talents are resources that one has and so they should be exploited in starting and running a business. It is important to identify these skills and talents that you have.
Another ways of identifying business ideas is by analyzing key components like
Your Skills/Talents/Knowledge (skills mean Business)
Using your skills you can provide a service or make things (a product), but think if the product or service will be used by another business or people and ask yourself the following questions;
Which people/businesses will consume this service or product?
What services or products to offer?
A skill
This is defined as the great ability or expertise that comes from training and practice. It mainly involves the use of hands or body. A skill is something which someone is good at doing. For example: those good at plaiting hair can set up hair saloons or those who are grafting skills can set up a horticulture nursery.
A Talent
This defined as a superior, apparently natural ability in the arts or sciences or in the learning or doing of anything. It is usually a natural inclination for a particular work. For example a strongman can do good work as a bouncer. If you can sing then you can become a musician and even start your own Music band
This defines as expertise acquired by a person through experience or education; the theoretical or practical understanding of a subject, and what is known in a particular field or in total; facts and information. For example, a doctor may set up a medical clinic or a trainer who shares information as a business. If you know how to write a business plan, you can start a consultancy firm specializing in writing business plans
•What skills do you have?
•What talents do you have?
•What knowledge do you know?
Problems (Problems Mean Opportunities)
When there is a problem usually one can solve it by creating a business, for example traffic jams in Kampala lead to the introduction of boda-bodas because they can move easily in the small spaces left by cars in the traffic jam.
Qn. List of some common problems faced in the community and possible solutions. (You can have more than two solutions for a single problem).
Problems /Possible Solutions/Opportunities
Resources (Things Can Make Money)
One can use the resources he/she has to develop a business idea. You can ask yourself the following questions about the resources that you do have;
•Can other people use it differently?
•Can I package it differently?
•Can it be used as a substitute for?
•Can it be used to provide a service?
•Can it be used by altering the size, shape, and color?
•Can it be recycled or reused?
•Can it be used by combining with other things?
•Can its bits or parts be used?
Many people have land or by products of their business or old clothes in their homes that they can use to start other businesses. Off cuts from sweaters can be used as stuffing’s for cushions and pillows.
Needs (People want Things)
People Want Things all the Time. You Can get them (things) by Producing Products or Offering a Service. That is
•People or interest group has needs that are not fulfilled.
•People want things/services but do not exist.
•Have seen things/services but can’t find it.
•The existing thing/services are out of date or style.
•The existing products are not easy to use.
•Quality may not good enough.
•What is existing may be too expensive.
Therefore, we should always be on a look out for business ideas and in doing so we could involve our families, peers or workmates. The outcome will always be ideas for a service or product business that you can think of. These ideas can be a valuable basis for identifying new business opportunities, and new and better ways of solving problems in existing enterprises.
At the end of it all, ask yourself the Following Questions, Using your Business Idea
•Does this idea match my strength?
•Does this idea help me to meet my personal objectives?
•Which skills/talents/knowledge am I employing in this business idea?
•Is there an under/not utilized resource that I am using to produce a product?
•Which resources do I need to realize the business idea?
•What gap am I filling? Is it a need or problem?
•Are there people out there who will buy your product or pay for your service?
The Entrepreneur
In starting and managing a business the entrepreneur is at the centre stage. He/she can steer the business to success or failure.
The entrepreneur is the person who organizes runs and is responsible for running a business, a person who has possession over a new enterprise or venture and assumes full accountability for the inherent risks and the outcome. Entrepreneur applies to someone who creates value by offering a product or service. Entrepreneurs often have strong beliefs about a market opportunity and organize their resources effectively to accomplish an outcome that changes existing interactions.
Some observers see them as being willing to accept a high level of personal, professional or financial risk to pursue that opportunity, but the emerging evidence indicates they are more passionate experts than gamblers.
Being an Entrepreneur
Do not need to follow the orders of others. The customer is the boss, but they decide themselves on how to act.
Pleasure – Happiness
If they manage to create a business in the area of hobby, interest or knowledge, it is much more fun!
Economical Benefits
If the entrepreneur is successful, he will benefit personally. Can’t be sacked! Most of the richest people in the world are entrepreneurs
Self Esteem
If you manage to be successful, you feel much better!
Many small businesses become bankrupt and then you risk not only losing your own money, but also others.
Entrepreneurs will face very high obstacles with pressure on friends and family
Being Alone
When the entrepreneur is the only responsible actor behind the business it can be very lonely.
Financial Insecurity
Variations in income – Based on the business, sometimes no money to pay salaries.
Long Hours – Hard Work
In the beginning (or always) the entrepreneur will have to work long hours to make ends meet.
The Entrepreneurial Process
•First an idea to fulfill a need.
•The idea is worked on.
•Idea converts into an business idea.
•The business idea is the ground for the venture.
•Then we need to plan ourselves to start the company – what to we need to do?
•This plan is: the making of a business splan.
•The business plan touches upon almost everything considering the business.
•Be realistic...
•What personal talent, skill, knowledge and experience is needed?
•Do I know where my strengths and weaknesses are – which will affect my venture?
•Do you realize what sacrifications are needed and are you ready to make these sacrifications?
•Why do we start companies?
•To do something which is more fun?
•Use our talent, skills, expertise?
•Be independent?
•We want to grow ourselves and widen the horizon?
•We are idealistist? (make a better world)
•Of need?
•To make money?
Four Elements needed to get your Business Started
•Creating a place for your business – in location and in people's minds.
•The money, product, knowledge etc. that make up the business.
•The desire to start a business.
•Moving resources/products/services in exchange for money.
The Next Step
Nowto Focus on these Aspects with the Business Plan
The business plan is our tool – model to get the best results
Life Expectancy of Firms
50%- within 2 yrs from the start
65%- within 5 yrs from the start
90%- within 10 yrs from the start
A Business Plan
A Business Plan is like a road map that helps individuals gain financial and other support for their enterprise or project. A business plan also enables Businessmen to handle the opportunities and obstacles they will inevitably encounter as they move forward with their dream.
The Business Plan is a report that describes the firms abiltiy to sell enough of the product/service so that the firm will show growth and profits.
Meet Joseph Mayanja, a young entrepreneur. He has a great idea for a new technology that he thinks will revolutionize the consumer goods industry. To get the business off the ground, he knows he will need investment capital.
Now meet Joyce Namusoke. She runs a successful business but wants to apply for a loan so she can expand her enterprise.
Finally meet Antony Kirigwajjo, he has an idea for a new product line and wants to get approval and funding from the firms Directors team to develop the line.
Every Business- whether it’s a start-up company, an expansion of an existing firm –a spin off from the parent company, or even a project within an established organization-needs a business plan to navigate successfully through its own unique competitive environment.
Preparing a business plan is time consuming process, as a well-developed plan has numerous sections and comprehensive information. To prepare a business plan for your own business or project, you will need to think carefully about a number of key issues –such as who your customers and competitors will be, how much money you will need to invest in the business and what kind of payoff you have in mind.(to name just a few).
But all of this work is very worthwhile. Armed with a well-prepared plan you stand a much better chance of obtaining the investment shillings and other forms of support you will need to make your business succeed.
In summary; the purpose of the business plan preparation is to gather all the information necessary to make a decision on whether or not to go into a particular business or to expand an existing business.
A second purpose is to provide you with enough information to decide how best to operate the business. Later in the strategy formulation phase, you will decide how the business will be run (who will manage the business, what prices will be charged, how much advertising will be used, etc). The strategies that you decide upon in the second phase will, to a great extent, be based upon the information that you gather and analyze it in this first phase.
The third purpose is to compile information which, although of little concern to you, helps readers of your business plan better understand your business. If, for instance, you intend to use your business plan to get a bank loan, you may want to include a brief history of your business, a description of your products and services, etc.
A business Plan Is Important Because
•It guides the owner in running the business.
•It is a way of selling yourself and your business to possible partners.
•It shows that the business owner is organized and knows his or her business.
•It provides information about the business and the market one is to operate in.
A well-prepared business plan will increase your chances, of obtaining financial assistance from financial institutions e.g. banks.
Contents of a Business Plan
1.Description of Business
This section of the Business Plan provides background and the information on how your business was started and how it is presently doing or, if a proposed business, how and when you plan to start it. The business description delivers this content in a straightforward and informative manner, but with an upbeat and inspiration tone. The purpose of the business description is to objectively explain and justify your business idea in a positive and enthusiastic manner.
What goes into the business descriptions?
Include Information about the Business, Such as
•What the history of the concept or the business is (is it on the drawing board, at the start-up stage, ready to expand?)
•What markets the business will serve.
•What kind of business it is (manufacture, retailer, service business).
•What the product or service is.
•Why people will use it (what problem will the product or service solve for customers?)
•What the financial status is.
You May Decide To Also Include the Following Information
•Who will manage the business (be sure to emphasize the skills and experience of the management team, as readers familiar with the industry will be most interested in the quality of the people on the team).
•What the structure of the business is (partnership, corporation, franchise).
•Where the business will be located.
•Where will you locate your business?
The Location of your Business is a Very Important Decision. The Wrong Location Could Jeopardize the Success of your Business. Points to Consider are
•Do you need to be located close to customers, or are you able to service your clients remotely via the telephone or over the Internet?
•Do you need to be located close to suppliers? I.e. consider the delivery costs for raw materials and supplies.
What Features Must your Premises Have? i.e.
•Consider size, street frontage, show rooms, parking, loading bays, and special facilities.
•Do you intend to lease or purchase your premises?
•Do you plan to operate your business from home?
A variety of factors will influence your selection of location and premises. Ensure you make a wise decision, keeping in mind the costs and inconvenience of relocating.
Tip: Be enthusiastic in your business description; this is the section in which you present the value of your concept-why you believe the business will be a resounding process.
Tip: In drafting the business description, balance your enthusiasm for the venture with a measured acknowledgement of risks and costs involved.
This is your first and perhaps easiest task in writing a Business Plan. In this element of your Business Plan you are to introduce your company to the reader and explain the purpose of your business plan. It should be used to briefly familiarize the reader with who you are, what the goals of your business are, and when these goals will be accomplished. If you are presenting your plan to a banker, you may state how much you intend to borrow, and what you intend to do with the funds.
The presentation of your plan is almost as important as its content, particularly if you are going to present it to a bank. Even if it will never be seen by anyone other than yourself, you should make it as neat and orderly as possible, both as an exercise in good planning in it, and in order to make easier to use.
1.2Business Vision
The best vision statements for result areas describe outcomes that are five to ten years away, although some look even further out.
In general, you should base your vision statements on the best possible outcome. In fact, you might want to envision something even better than what you consider to be the best possible outcome. Remember that the purpose of the vision statement is to inspire, energize, motivate, and stimulate your creativity, not to serve as a measuring stick for success; that is the job of your objectives and goals.
The quality of your vision determines the creativity, quality and originality of your ideas and solutions. A powerful vision statement should stretch expectations and aspirations helping you jump out of your comfort zone.
Remember that the purpose of the vision statement is not to serve as a "real" target that you are going to measure against to determine if you have succeeded or failed. You should use your goals and objectives to do that. Instead, the purpose of the vision statement is to open your eyes to what is possible.
Describe your vision statement in present tense as if you were reporting what you actually see, hear, think and feel after your ideal outcome was realized.
Your vision statement should describe how you will feel when the outcome is realized. Including an emotional payoff in your vision statement infuses it with passion and will make it even more compelling, inspiring, and energizing.
Examples of Vision Statements
"To be a leading entity to provide training, knowledge and consulting services all over the world in the fields of self-development and human resources development for individuals and business societies."
"Victor Valley High School is dedicated to providing the highest quality educational program with the cornerstones of value learning, self-worth among students and staff, quality performance among students and staff, and transition for students to a productive and responsible participation in society at large."
1.3Business Mission
A paragraph that describes the firm’s goals and competitive advantage 20-50 words, Keep it simple, clear and brief. The best mission statements tend to be 3 to 5 sentences long. The mission statement should touch upon what you want the company to focus on.
A mission Statement Summarises
•Company goals.
•Company added value.
•Company target markets.
A mission statement is unique to a company and it describes what a company does.
Examples of Mission Statements
"To create a profitable restaurant with an exciting atmosphere, great food, and excellent service where people truly enjoy coming to eat. To provide a safe, healthy, and rewarding workplace for our employees."
"Growing from strength to strength, XYZ is dedicated to improving the quality of life, making it better, safer and easier." -- Submitted by Shaniz
"To provide high quality products that combine performance with value pricing, while establishing a successful relationship with our customers and our suppliers”
1.4Business Goals
From the beginning the business owner should work to create clearly defined goals for his or her business plan. A goal is something that we want to achieve. Goals ought to be
These goals begin at the top of the business and work their way down. Some are longer than three years and others are shorter than one year. Categorize the goals into long-term (More than 3 years), medium term (between 1 to 3 years) and short time (less than one year). However, categorization of the goals will also depend on the type of business.
Businesses are formed to achieve something. For a business to remain in operation, it must have a goal. Goals are results to be achieved. Goals are also called objectives or ends. You may need to gather more information when setting them.
There are Questions You Need to Ask When Establishing Business Goals
•What do I have to do to get where I want to be in 2 (5) years?
•What are the necessary means for doing this?
•Who could help me in that?
•What obstacles will I possibly face, and how can I overcome them?
•Where do we want to go in terms of products, customers, profits, return on investment?
•What changes do we have to make in each section of the business to get us there?
It will also help you to think seriously about what you can do to reach your objective of having a
Successful Business. Consider the Following Points That Relate to you
•Individual problems which interfere with the way to success - they should be reduced!
•External obstacles that hinder your plans - they should be overcome!
•Find some small and practical things that you can do over the coming days to help you to reach your goals!
•Think about help you could get from other people (what, from whom?).
•Try to divide your bigger goals into several smaller objectives. Establish an order and priorities:
•What has to be done first to achieve the next goal?
•What would come next, and so on?
•When doing this you should think of a realistic time-frame, such as the next six months. If you want, you may enlarge this period of time.
All Objectives Should be Smart i.e. Specific, Measurable, Achievable, Realistic, and Timed as Explained Below
Specific: Be precise about what you are going to achieve
Measurable: Quantify your objectives
Achievable: Are you attempting too much?
Realistic: Do you have the resource to make the objective happen (men, money, Machines, materials, and minutes?)
Timed: State when you will achieve the objective (within a month? By March 2012?)
Example of Goals
•Start the business worth UGX 1,000,0000/= by November 2008
•Finish construction of the poultry house which can house 200 birds by August 2008
•Stock 200 birds (layers) by November 2008
•Reduce production costs by 500,000 every year.
Importance of Goals in business
Goals focus the efforts of individuals in the business.
For Example
•“You cannot hit a target you can’t see!”
•“If you do not know where you are going, you will never know when you get there.”
•Goals help in planning. We plan to achieve something.
•Goals encourage people to work
•Goals assist in watching and checking performance of workers and the entire business
Questions That You Need to Answer after Writing down Your Goals
•Are the goals which you have put to your introduction clear and unambiguous to you and to the outside reader?
•Do you understand them clearly?
•Will you be able to say when you have achieved them or are they are vague and indeterminate?
•Do you know by when you aim to achieve them?
1.5Important Contents
For an Existing Business, the Following Information Should Be Spelt Out
•Name of Business
•Legal name and trade name, if any.
•Date and place of Registration or Incorporation, If any
•Date actual operations began or planned to begin.
Brief History
Discuss the type of business, the major events in the past operations and discuss the results, mentioning sales history when pertinent.
Legal Form of Organization
The Entrepreneur Has to Make a Choice When It Comes to Deciding the Type of Business Organization, Which Includes the Following
•Sole proprietorship.
•Private limited liability Company (by shares or guarantee).
a)Sole Proprietorship
By definition, a single proprietorship is a business owned and operated by one person. The owner and the business are synonymous in the eyes of the law. All the assets in the firm are owned by the proprietor, subject only to the liabilities incurred in its establishment and operation. The proprietor is solely responsible for its debts, incurs and losses, assumes all its risks, provides all its capital, and provides its total management. The only requirement for its establishment is that the owner obtains any licenses required in the city, town or local council.
Advantages of Sole Proprietorship
i)Simplicity of the organization.
ii)Owner’s freedom to make decisions.
iii)Owner’s enjoyment of all the profits.
iv)Minimum legal restrictions.
v)Ease of discontinuance.
vi)Tax advantages.
Disadvantages of Sole Proprietorship
i)Owner’s possible lack of ability and experience.
ii)Limited opportunity for employees.
iii)Difficulty in raising capital.
iv)Limited life of the firm.
v)Unlimited liability of proprietor.
Typical traders include tradesmen such as plumbers, electricians, television repair people etc. Nowadays lots of people are setting up their own businesses by creating small web-based companies working from home.
A partnership is usually defined as an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are based upon a partnership agreement. The partnership agreement should always be reduced to writing, even though this is not a legal requirement. It should cover all areas of possible disagreement among the partners. It should define authority and the rights and duties of each partner, and the limits to such authority. It should include an agreement on how profits and losses are to be divided.
Advantages of the Partnership
i)Ease of the organization.
ii)Combined talents, judgment and skills.
iii)Larger capital available to the firm.
iv)Maximization of the personal interest in the firm.
v)Definite legal status of the firm.
vi)Tax advantages.
Disadvantages of the Partnership
i)Unlimited liability.
ii)Limited life.
iii)Divided authority.
iv)Danger of disagreement.
Partnerships are typically found in professional services such as accountants, solicitors, doctors, dentists etc. where the partners can share expertise and skills. They can also share the workload; organizing work rotas to allow for time off and holidays. Partners also pool their capital.
c)Private Company
A private company has a minimum number of two (2) shareholders required and it limits the number of its members to 50 (employees are not part of this number). Companies are owned by shareholders that each contributes a stock of money into a central pool. This pool of capital is then used to provide a core sum of finance, which is then added to by borrowing and other forms of finance. Directors run the company on behalf of shareholders who receive a share of the profits as dividends. Examples include MTN, Airtel, Rwenzori beverages (makes of mineral water) among others.
Advantages of a Private Company
i)Limited liability to shareholders.
ii)Perpetual life (If all the shareholders died the business would go on as a legal entity).
iii)Ease of transferring ownership.
iv)Ease of expansion.
v)Applicability to all sizes of firms.
Disadvantages of a Private Company
i)Government regulations.
ii)Expense of organization.
iii)Pay corporate tax (this is higher).
1.6Product Description
The product description is the detailed description of the product/service that you intend to market. It offers a thorough and straightforward description of the products or services the business will provide to customers. For example, include product characteristics such as functionality, design, styles, and colors.
The product/service description should be complete enough to with a clear idea of your products/services, if the product is unusual or not easily described, include a picture or a drawing which will highlight the offerings special features and unique points of differentiation. If a range of products or services are being offered, highlight the principal one or two and list the rest of the range here and/or put the full product/service range in an appendix. As much as possible, describe the product or service from the customer's perspective.
The description should tell what makes your company's product or service different or unique in the marketplace. More detail on this will be provided in the competitor analysis section, but a brief highlighting of product distinctions and key selling attributes this will help one to understand the product or service better.
After describing the product or service, state what benefits the customer will receive from purchasing the product or service (e.g., what problem is being solved). This will most likely further explain the value proposition statement defined earlier.
Under the product description stress your USP - be sure to emphasize your USP - Unique Selling Proposition. Your USP is the proprietary information that sets your product or service apart from your competition. If you are using your business plan to solicit funds, this is what your financiers will want to see. If it is an internal document, your USP will be critical to your sales and marketing strategies. Without a USP, your product or service will appear drab and there will be no compelling reason for people to buy it.
What would some USPs be? For a food product, it could be a proprietary recipe (like Nalongo’s steamed food in Katwe) or a special way the food is served (like the Mongolian food).
Focus on your success factors. In other words, think about how you are going to make money. Why will your products or services be successful in the marketplace? There are many numbers of reasons you can use - it's a well-organized business, we use state-of-the-art equipment, our location is exceptional, the market is ready for our product, it’s a great product at a fair price, etc.
If you are selling a product, you may want to include full specifications. If available, include a quality photograph as well.
One of your challenges will be to keep the "unique" in your USP
Example of a Product Description
Pap Café provides its customers, whether at its facility on Parliament Avenue or one of the Mobile Cafes, the ability to custom order a coffee beverage that will be blended to their exact specifications. Each of Pap’s Baristas (a person who has acquired some level of expertise in the preparation of espresso-based coffee drinks) will be trained in the fine art of brewing, blending, and serving the highest quality hot and cold beverages, with exceptional attention to detail.
Besides coffees, Pap Café will offer teas, domestic and Italian sodas, frozen coffee beverages, seasonal specialty drinks, cakes, pastries and other baked goods. Through the website and certain locations, Pap Café will market premium items such as coffee mugs, T-shirts and sweatshirts, ball caps, and more.
Format/Contents of A Business Plan
Executive Summary
•Purpose of the Plan.
•Finance Required for Starting Up the Business.
•Brief Description of the Business.
•Nature of Business.
•Background of the Business.
The Company and Industry Overview
•Mission Statement.
•Purpose of the Business.
•Core Values.
•Corporate Goals.
•Enterprise Objectives.
•Short Term Objectives.
•Medium Term Objectives.
•Long Term Objectives.
Product or Service
Product Feature
•Use of Service or Product.
•Product Benefits.
•Uniqueness of Product or Service.
•Development Stage.
•Skills and Technologies Required In the Business.
Marketing Plan
•Marketing Strategy.
• Promotion.
•Pricing Strategy.
•Market and Industry Analysis.
•Situation Analysis.
•SWOT Analysis.
•PEST Analysis.
•Competitive Analysis.
•Competitors Strengths and Weaknesses.
•Market Size and Growth
•Market Share Estimate
•Special Market Characteristics
Operational Plan
•The Operations Process.
•Building and Equipment.
•Location of the Business.
Management Plan
•Human Resource Strategy.
•Management Performance.
•Reward and Compensation.
•Skills, Experience and Qualification.
•Amount Expected to Be Paid to Each Worker.
•Training Policy
Financial Plan
•Finance Required to Start-up the Business.
•Financial Planning.
•Projected Sources of Expenses.
•Income Statement Projections.
•Balance Sheet Projections.
•Ratio Analysis.
•Cash Flow Projections.
•Monitoring Standards.
•Control Measures.
Chapter - 9
Entrepreneurship Development
Entrepreneurship Development is a deliberate Endeavour in human resource development, which is usually undertaken by the state or a community with the major aims of: Developing competence among participants to start, manager and develop enterprises and developing greater understanding of entrepreneurship, as a means of providing an enabling environment for entrepreneurship, as a means of providing an enabling environment for entrepreneurs to thrive.
The Need for Entrepreneurship Development
Over the past few decades, entrepreneurship, has gained amazing popularity not only in Uganda but also in the wider world. This is as a result of the significant changes in the workplace and the social and political environments that are funning the growth of entrepreneurship worldwide. These factors include:
Technological advancements that have compressed technological processes and enabled many things to be made/and services to be delivered at a fraction of the original cost.
Entrepreneurial Education: Since the 1980s, the countries that have invested in teaching entrepreneurship have harvested a rich crop of high caliber entrepreneurs.
Downsizing – as big corporation reengineer their operations and retrench unwanted staff, they have ended up releasing a number of qualified and well-connected individual who have joined the entrepreneurial class. Downsizing has also removed the myth of lifelong employment and awakened people to the promise of entrepreneurship “Sometimes as a fallback position. Downsizing has also made corporations to outsource non core activities providing opportunities for entrepreneurs.
More sophisticated customers demanding higher quality and more personalized goods and services have opened up interesting and profitable for entrepreneurs to tap.
Easier access to information, through vast communication networks like the ‘worldwide web’, have enabled entrepreneurs to access a large number of potential suppliers and customers quickly and at minimal cost.
Liberalization and globalization has enabled small entrepreneur firms to access international markets without the threat of protectionism and other trade barriers.
A shift to shift to service sector: As economies shift to the service sector that requires personalized attention, smaller companies are able to create profitable niches to compete with larger established firms.
Threats of Entrepreneurship/Barriers
Entrepreneurship, as a career, also possess many serious challenges, which anyone hoping to take up a career in entrepreneurship should be aware of in order to plan for them. The challenges include:
Uncertainty of Income: In most cases the initial stages of the entrepreneurial career are filled with uncertainty, and many entrepreneurs will not have enough money even for their basic survival. There is no regular income, and many entrepreneurs are forced to draw from their savings. This is the most trying stage of any entrepreneur.
Risk of Losing the Entire Investment: Business failure is a reality that threatens entrepreneurs at all level, but most especially the new enterprises. Business failure will result not only in the loss of a job, but also the entire investment and sometimes the entire livelihood. This threat becomes even greater for entrepreneurs who mortgage all their savings and assets to finance their enterprises.
Long Hours of Hard and Challenging Work: Without adequate support structures and resources, entrepreneurs have no option but to engage their own mental and physical energies to move their investments especially during the early stages. Hard work and long hours is therefore a reality of many an entrepreneurship career.
High Levels of Stress: The pressure of hard-long hours of work and the uncertainties associated with entrepreneurship result in highly stressful life styles for entrepreneurs. Most entrepreneurs put significant investments in their enterprises, have no steady incomes, have mortgaged everything to finance their businesses, and the line between their success and their failure is every thin; causing enormous anxiety and stresses to the entrepreneur.
High Levels of Responsibility: Entrepreneurship brings the thrills of being the boss, but also the responsibility for decisions that not only affect the entrepreneurs and their families, but also the livelihood of employees, suppliers and other stakeholders who somehow depend on the firm for their own survival.
The process of Entrepreneurship Development
Entrepreneurship Development presupposes that although certain characteristics are inborn, the bulk of entrepreneurial characteristics can be developed through:
Acquired Factors: Individual personal effort through formal education, work experiences, acquired technical skills and exposure.
Societal Influences: (or sociological factors) including imitating role models, peer influence, cultural and religious beliefs and norms.
The Entrepreneurial Process
The process of starting a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. The process has four distinct phases: (1) identification and evaluation of the opportunity, (2) development of the business plan, (3) determination of the required resources, and (4) management of the resulting enterprise. Although these phases proceed progressively, no one stage is dealt with in isolation or is totally completed before work on other phases occurs.
For example, to successfully identify and evaluate an opportunity (phase 1), an entrepreneur must have in mind the type of business desired (phase 4).
Identify and Evaluate the Opportunity
Opportunity identification and evaluation is a very difficult task. Most good business opportunities do not suddenly appear, but rather result from an entrepreneur’s alertness to possibilities, or in some case, the establishment of mechanisms that identify potential opportunities. For example, one entrepreneur asks at every cocktail party whether anyone is using a product that does not adequately fulfill its intended purpose. This person is constantly looking for a need and an opportunity to create a better product. Another entrepreneur always monitors the play habits and toys of her nieces and nephews. This is her way of looking for any unique toy product niche for a new venture.
Although most entrepreneurs do not have formal mechanisms or identifying business opportunities, some sources are often fruitful: consumers and business associates, members of the distribution system and technical people. Often, consumers are the best source of ideas for a new venture. How many times have you heard someone comment, “If only there was a product? That would…” This comment can result in the creation of new business. One entrepreneur’s evaluation of why so many business executives were complaining about the lack of good technical writing and word-processing services resulted in the creation of her own business venture to fill this need. Her technical writing service grew to 10 employees in two years.
Due to their close contact with the end user, channel members in the distribution system also see product needs. One entrepreneur started a college bookstore after haring all the students complain about the high cost of books and the lack of service provided by the only bookstore on campus. Many other entrepreneurs have identified business opportunities through a discussion with a retailer, wholesaler, or manufacturer’s representative.
Finally, technically oriented individuals often conceptualize business opportunities when working on other projects. One entrepreneur’s business resulted from seeing the application of a plastic resin compound in developing and manufacturing a new type of pallet while developing the resin application in another totally unrelated area—casket moldings.
Whether the opportunity is identified by using input from consumers, business associates, channel members, or technical people, each opportunity must be carefully screened and evaluated. This evaluation of the opportunity is perhaps the most critical element of the entrepreneurial process, as it allows the entrepreneur to assess whether the specific product or service has the returns needed compared to the resources required. This evaluation process involves looking at the length of the opportunity, its real and perceived value, its risks and returns, its fit with the personal skills and goals of the entrepreneur, and its uniqueness or differential advantage in its competitive environment.
The market size and the length of the window of opportunity are the primary basis for determining the risks and rewards. These risks reflect the market, competition, technology, and amount of capital involved. The amount of capital needed provides the basis for the return and rewards. The methodology for evaluating risks and rewards frequently indicates that an opportunity offers neither a financial nor a personal reward commensurate with the risks involved. One company that delivered bark mulch to residential and commercial users for decoration around the base of trees and shrubs added loam and shells to its product line. These products were sold to the same customer base using the same distribution (delivery) system.
Follow-on products are important for a company expanding or diversifying in a particular channel. A distribution channel member such as Kmart, Service Merchandise, or Target prefers to do business with multi-product, rather than single-product, firms.
Finally, the opportunity must fit the personal skills and goals of the entrepreneur. It is particularly important that the entrepreneur be able to put forth the necessary time and effort required to make the venture succeed. Although many entrepreneurs feel that the desire can be developed along the venture, typically it does not materialize. An entrepreneur must believe in the opportunity so much that he or she will make the necessary sacrifices to develop the opportunity and manage the resulting organization.
Opportunity analysis, or what is frequently called an opportunity assessment plan, is one method for evaluating an opportunity. It is not a business plan. Compared to a business plan, it should be shorter; focus on the opportunity, not the entire venture; and provide the basis for making the decision of whether or not to act on the opportunity.
An opportunity assessment plan includes the following: a description of the product or service, an assessment of the opportunity, an assessment of the entrepreneur and the team, specifications of all the activities and resources needed to translate the opportunity into a viable business venture and the source of capital to finance the initial venture as well as its growth. The assessment of the opportunity requires answering the following questions:
•What market need does it fill?
•What personal observations have you experienced or recorded with regard to that market need?
•What social condition underlies this market need?
•What market research data can be marshaled to describe this market need?
•What patents might be available to fulfill this need?
•What competition exists in this market?
•How would you describe the behavior of this competition?
•What does the international market look like?
•What does the international competition look like?
•Where is the money to be made in this activity?
Developing a Business Plan
A good business plan must be developed in order to exploit the defined opportunity. This is a very time-consuming phase of the entrepreneurial process. An entrepreneur usually has not prepared a business plan before and does not have the resources available to do a good job. A good business plan is essential to developing the opportunity and determining the resources required, obtaining those resources, and successfully managing the resulting venture.
Determine the Resources Required
The resources needed for addressing the opportunity must also be determined. This process starts with an appraisal of the entrepreneur’s present resources. Any resources that are in critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount of variety of resources needed. The downside risks associated with insufficient or inappropriate resources should also be assessed.
Acquiring the needed resources, in a timely manner while giving up as little control as possible is the next step in the entrepreneurial process. An entrepreneur should strive to maintain as large an ownership position as possible, particularly in the start-up stage. As the business develops, more funds will probably be needed to finance the growth of the venture, requiring more ownership to be relinquished. Alternative suppliers of these resources, along with their needs and desires need to be identified. By understanding resource supplier needs, the entrepreneur can structure a deal that enables the recourses to be acquired at the lowest possible cost and the least loss of control.
Manage the Enterprise
After resources are acquired, the entrepreneur must use them to implement the business plan.
The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.
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